When a small business is new, it can’t hold credit cards. In the first few years, the business owner has to take out personal credit cards to cover business expenses. When I had cancer, Fabhio took his eye off the business ball for many months to care for me, our young children and our home. The result was a roller-coaster ride of employee embezzlement and spiralling debt. We narrowly avoided bankruptcy, making proposals to our creditors. For example, if we owed a credit card $6000, we offered them $3000. Our proposals were accepted in all cases except one: American Express. They told us that the brand was so prestigious that it would be unseemly to accept such a proposal. Instead they wiped the debt clear and told us to piss off. Not really but as good as. We were ecstatic because it saved us several thousand dollars.
You may think this to be a kooky story but the sad reality is that, even in Canada, with free health care, cancer almost always leads to unexpected debt and can sadly end in foreclosures and bankruptcy. When you have cancer, multiple things are at play:
- You don’t care about anything because you have CANCER. You can’t trust yourself to not go out and buy a brand new car or Vitamix blender. In my case, I bought myself a MacBook Pro for 2 grand.
- You’re too sick to do stuff. Ergo, you spend money on cleaning services, take out, babysitting, snow shovelling. The list goes on and on.
- You feel terrible and you look worse. You get through it by going for massages, manicures, movie shows.
- You can’t work. If you have the most awesome benefits package, you still have to go at least 16 weeks without pay before you can start getting long-term disability which will pay you only a portion of your salary. If you don’t have benefits, you’re on your own. Either way, you won’t be able to work for a good year. If you are married, your spouse may well have to work reduced hours to care for you.
- Free healthcare only applies to the treatments you get through the hospital or doctors office (i.e. assessments, chemo, surgery). Outside treatments like medication, lymphatic drainage, physiotherapy, psychological treatment are not covered.
- You will definitely need a lot of psychotherapy at $100 a pop.
All this to say we emerged from cancer screwed on the financial front. We closed the business, screamed in rage for a few months, then picked up our socks and moved on. Fabhio got a decent job of which close to 100% of the salary goes towards paying off debt, including the second mortgage we took out to deal with the whole mess.
Personally, I am so proud of him. He has worked tirelessly to put this behind us. I’m also very proud of the family as a whole and how we’ve worked to cut out all unnecessary expenses and stuck with a Draconian budget. It’s beginning to pay off in spades.
The stage is set: we’ve established that Fabhio’s credit is toast.
SUPPLEMENTARY CREDIT CARD
Luckily, my credit remained intact throughout this ordeal. I ordered a supplementary credit card on my MasterCard account and Fabhio has been using that for the past year or two. Even though he uses it wisely and pays it off every month, he is not building good credit for anyone except me.
PREPAID CREDIT CARD
To build his credit, we looked into getting a prepaid credit card. I was surprised to learn that these cards do not report to the credit bureaus and also do nothing to build a client’s credit.
SECURED CREDIT CARD
Not knowing what to do, I explained the situation to my friendly, local bank manager and she suggested a secured credit card. We set up an appointment and planned to apply for the CIBC Aero Platinum Visa card. It was offering a bonus of 5000 Aeroplan points and required an income of $15K. The $39 annual fee was to be waived beginning April 1 but the branch manager told us she would not charge us. To get a secured credit card, you use cash or cheque or GIC in the amount of your credit limit. If you want a $2000 credit card limit, you give the credit card company $2000 in security for a particular time period (generally one year). At the end of the year, if you haven’t made a mess of things, you get your money back and you can move forward with normal credit.
We were bummed that Fabhio couldn’t apply for the CIBC Visa Aerogold Infinite card. It was offering 15000 bonus Aeroplan points but it had a $5000 minimum limit and was not an option for a secured card. However, the manager secretly ran the application through while we were in her office and shockingly, it came back with a pre-approval. She said that bad debt starts to fall away 3-5 years after the fact. Even though Fahbio had applied for a Visa card in the past few months and been denied, it was possible that since then, some bad debt had been erased.
CREDIT CARD TRACKER
With Fahbio’s credit on the mend, I have high hopes for him on the credit card hacking front. I’ve even given him his own chart. I’ll add it to My Credit Card Tracker and update it between now and the start of our round-the-world trip in Fall 2017.
|CARD||ANNUAL FEE||BONUS||PERKS||DATE ISSUED||INCOME REQD||RE-BONUS?|
|CIBC Visa Aerogold Infinite||$120 waived as of April 1 but the bank manager waived the fee in March||15000 Aeroplan pts with first purchase||March 2016||$60K personal or $100K household||YES unless CIBC thinks you are abusing the system|