Chan's Personal Blog

I was talking with an accomplice the other day about paying for tuition at university. He told me that he couldn't qualify to get money from the government's student loan program because his household makes too much money; therefore he does not qualify. The government assumes that his parents help out somewhat with paying for tuition which wasn't the case. So, when he couldn't get a loan from the government, he looked to other sources.

To my horror, he told me that he used his credit card's line of credit to pay for tuition. I'll break this down later, but I'll say that keeping debt on a credit card is one of the most dangerous things ever.

I asked him why he didn't go to a bank and get a student line of credit instead. He answered, oh the banks charge even more interest than my credit card. This is NOT true at all.

Let's do the calculations. (I'm pulling all my numbers Royal Bank). To keep the calculations simple, I'm assuming that no payments will be made during the span of a year.

Case #1: Student Loans via Credit Card
Amount in debt: $2,500
Annual Interest Rate: 18.5% (assuming a student visa card)

After first year, interest payment amount: $462.50
Total Owing after first year: $2,500 + 462.50 = $2962.50
Total Owing after second year: $3510.56

Case #2: Student Loans via Bank's Student Line of Credit
Amount in debt: $2,500
Annual Interest Rate: 5.25% (prime rate + 1%)

After first year, interest payment amount: $131.25
Total Owing after first year: $2,500 + 131.25 = $2631.25
Total Owing after second year: $2769.39

Formula
The formula used for each year's total owing is:
(Amount In Debt) x (1 + (Interest Rate / 100))

For example:
($2,500) x (1 + (18.5 / 100)) = $2962.50 (Year 1)
($2962.50) x (1 + (18.5 / 100)) = $3510.56 (Year 2)

Conclusions:
As we can see, by going with a bank's student line of credit, the interest payments are much much less. My accomplice could save $331.25 in the first year by ditching the credit card debt and going with the bank's line of credit. Three hundred dollars can go a long way! That could be enough to buy about a hundred tacos for example. We can also see that a credit card's interest rate is obscenely high, and that is why one should never hold credit card debt.

I'm generally opposed to the idea of even holding debt, but sometime's there's no choice. In those cases, one should at least borrow money wisely and do some research. It makes a huge difference of how quickly you can get out of debt.

Today when I got home, I noticed that there was a letter from the Provincial Ministry of Finance in my mailbox. At first, my soul groaned as I thought, crap, more taxes to pay. I opened the letter and to my surprise, it was a cheque for a few hundred dollars!

A few months ago, I blogged about getting my Medical Service Plan (MSP) payment reduced. I took the steps outlined in that article, sent in a form, and a few months later, I've got results. It appears that I've been paying TOO much on my healthcare this year so far, so they've refunded a portion of that back. In either case, I encourage you, if you make less than $28,000 a year (net income), then you qualify to get your public healthcare payment lowered.

If you're wondering what net income is, it's the amount you make after all the deductions you do on your taxes. You can find out what your net income is by looking at your Notice of Assessment that the government sends you after you file your taxes. There should be a row called net income.

Anyways, horray, this nice chunk of change is going into the computer fund.

A few weeks back, there was some buzz in the stock market about Tim Horton's. As you may or may not know, Wendy's (yes, the burger chain) owns Tim Horton's, and yes, the company is not in Canadian hands. If one wanted to invest in Tim Horton's, one had to buy the parent company's stock, Wendy's. There were rumours however that Wendy's was going to spin-off Tim Horton's as its own company and stock. I thought, great, I would invest in Tim Horton's.

Wendy's stock was trading at around $45.50/share, which was a little expensive for me in stocks, so I was too cautious and didn't buy it. I now regret the move. Last week they officially confirmed that they intended to spin-off Tim Horton's as a stock. After the announcement, the Wendy's stock jumped 14% to around $53/share. I'm now kicking myself for not buying!

Here's the announcment they made:

Gah, why did I doubt the mighty powers of Tim Horton's? To illustrate this lost opportunity, say you bought the stock for $1,000. Today that stock would be worth about $1164 or a bit more (assuming purchase at $45.50/share and sold at $53/share).