My Banker, My Friend

When I first read an article warning that banks are changing standard mortgage wording to allow them to apply mortgage payments to other forms of debt, I was skeptical.  After all, a mortgage payment is a mortgage payment and a credit card payment is a credit card payment.  There is no ambiguity.

Then I received a letter from my credit card provider (see below) that says:

"In any of the above categories (a) to (d), those amounts with the lowest rate(s) of interest will be paid first before those amounts with the higher rate(s) of interest."

Now that's just mean.  Basic financial advice is that you pay down the debt with the highest rate of interest first.  It only makes sense.  And in troubled financial times, we all have to pay attention to basic financial advice.  Is it really in the bank's best long term interest to treat customers this way?  Here's what MNBA says:  http://www.mbna.ca/about_company_conductcommitment.html  I'll let you be the judge of whether this practice is "top quality customer service."

Codes of Conduct and Public Commitment

MBNA, a division of The Toronto-Dominion Bank and Canada's largest MasterCard issuer, is committed to providing top quality customer service. What sets us apart is our commitment to finding the right customers and keeping them.

Voluntary Codes of Conduct and Public Commitments are non-legislated commitments, voluntarily made by companies, that ensure a high level of service while helping them remain competitive. At MBNA we adhere to the following voluntary codes and public commitment designed to protect our customers.

Code of Conduct for the Credit and Debit Card Industry in Canada
Promotes fair business practices and ensures that merchants and consumers understand the costs and benefits associated with credit and debit cards.

Call to Action

I'm not going to rant about unfairness or counsel you to complain to the authorities, the ombudsman or the courts.  Yes, class action lawsuits and government intervention have happened over this kind of issue, but it's a long road.  My simple advice is to keep all of your eggs in different baskets.  The old advice was to have a relationship with your banker.  Keep all your services under one roof so they could get to know you and offer you the best deal.  Those days are gone.  Now you can have your mortgage with one company, your credit cards with two other companies and your retirement savings with yet another firm.  Divide and survive!