How To Save Money On Credit Cards And Travel With Barry Choi

Posted on: February 10, 2020

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How To Save Money On Credit Cards And Travel With Barry Choi

This episode is about smart ways to use credit cards and consolidation loans to help you pay off your debt. Barry also discusses how to get more bang for your dollar when it comes to vacations.

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. Richard Killen is a Toronto Licensed Insolvency Trustee and author of the book “The Glass Is Half Full”.

Richard Hi, I’m Richard Killen. Welcome to the Glass Is Half Full. The show that tries to get people to get a better bang for their buck, even if they’re kind of short on the bucks. So today we’re joined by Barry Choi. Welcome, Barry.
Barry Thank you for having me.
Richard I have to read this Barry to make sure I get it right. Barry is a Toronto based personal finance and travel expert who frequently appears on City TV, Global, CTV and other TV programs. He is also a regular contributor, to many financial and travel publications, and his blog “Money We Have” is one of Canada’s most trusted sources when it comes to both finance and travel. So once again Barry thanks for joining us.
Barry No problem.
Richard Today I’d like to cover both of the aspects of finance and travel. Okay, so I’d like to start with personal finance, maybe on the basis that if you don’t have any money whatsoever and no credit cards you are not going to travel very far anyway. I think you’ll agree with me when when I say that credit cards are the most ubiquitous, the most common form of personal credit in Canada.
Barry Definitely.
Richard And with everybody 18 or over has at least one.
Barry They should.
Richard If not 12. I don’t agree with 12.
Barry Don’t ask me how many I have.
Richard So I’d like to start off with credit cards. One of the things about credit cards, if you’re in the credit card business, to promote the card, to push your product, use many gimmicks, shall we say?
Barry Sure, yeah.
Richard Special offers. One of the most common ones, certainly that I’ve heard of, is the balance transfer usually based on interest. Can you explain that to us?
Barry Yes, so the thing about balance transfers, it seems like a gimmick, but I think it’s one of the best options out there, especially for people who have run up debt on their previous credit cards. Because usually when you look at an offer you are talking about points, cash back, benefits for airports or whatever, but what the balance transfer options, you’re basically guaranteed a lower interest rate when you sign up by transferring your previous balance to this new card. One good example is, and MBNA tree line gold card. It has a 0% interest rate for nine months. It comes with a $39 fee and 1% bounce transfer fee. But you know, 0% obviously is much lower than, say, the 19.99% that you’re currently paying.
Richard Yes, I know there is a difference.
Barry Yeah, huge, huge difference right? And even then, there’s the nice thing about that. even if you can’t pay off the entire balance right away, the balance or interest rate goes up to 8.99 or 12.99 depending on what you have. Which is still lower than what you’re paying before. The key thing is to understand that if you’re going to do this balance transfer it’s not just to, like constantly balance transfer to avoid paying your bills. The whole goal is to pay down your balance, right? So if you are to continue picking up debt with your new credit card, it doesn’t matter. You’re going to run into a whole eventually.
Richard Now, obviously, this depends how you handle your cards. There’s nothing…
Barry That’s right.
Richard Like if you’re paying your card off the end of every month, you’re getting down to zero of every month. You really don’t have a credit card there, do you?
Barry You have no debt, right? Like that’s a beautiful thing about credit cards when used responsibly. Not only do you build a good credit score, you can reap all the benefits from the points you earn or the cash back that you earn.
Richard So, on whole, it’s good to take advantage of these things, depending on what it is you’re transferring, and how much…
Barry 100% depends on the situation.
Richard We’ve all kind of pretty well, everybody, I hope has heard about the term consolidation loan, but it may not be 100% sure how that works. Can you flush that out for us?
Barry Yeah, generally speaking, is you get one big loan at a lower interest rate, I’m going to make up this number. Let’s just say you get that loan for 7%. Well, then, with that loan, you pay off all your other debts. So if we are talking about those credit cards that have 19.99%. Maybe your car financing is 10%. So you’re getting this loan with a lower interest rate to pay off all your other loans. The key thing to remember this, these loans are kind of open ended, so you can continue to pick up debt if you’re not careful. So you can’t just accept this loan thinking that well, I’m going to do this. You really need to have a plan to pay off your debts.
Richard So, you have seven or eight credit cards, and you owe a grand total of $30,000, will say $40,000, so you would go and you would get a loan from a bank, from finance company or whatever, that is offering you an interest rate, which is going to be better than what the credit cards are.
Barry Presumably. Exactly. You take that amount you get, pay if off. But you also really have to pay attention to the terms of that loan because it may be 7%, but it might be a floating rate where it could change at any time. Or, keep in mind, sometimes they may call that loan back and you don’t have that money handy, you actually end up with more debt.
Richard But in this you’re changing from one type of credit to another. You’re changing from revolving credit to a fixed credit where you’re paying both interest and principal down over a scheduled period of time.
Barry Exactly. So that’s where you had to really read the details. There are all these different types of loans you can get. Sometimes people get an interest only loan, for example, and they don’t realize that they’re making the minimum payments, but in reality, they still haven’t paid back anything.
Richard That’s for sure. If all you’re doing is paying the interest.
Barry Exactly. People just don’t realize that.
Richard Yeah, but one of the things that I’ve found, in my business, is that people get a consolidation loan. But, perhaps the lending institution that gave him the loan didn’t insist on cutting up the credit cards or something like that. Or maybe they did and the credit card company sent him new ones and things like that, and within a couple of years or something, the consolidation loans still has three years to go, but the credit cards have gone back up to perhaps even as much as what they owed when they got the consolidation loan.
Barry I think secretly, that’s the goal of the lenders, right? They want to make money off you. They’re not just…
Richard Well, we shouldn’t be cynical about these things.
Barry You know? Okay, let’s just say that’s right.
Richard It’s unfortunate.
Barry It is definitely unfortunate, that’s why I was saying, you need to have that plan of attack. That right.
Richard That’s what you were talking about.
Barry Exactly. So you take that loan and pay off your highest interest debt first, so you can just reduce the amount of interest you are paying, and maybe right away you lower, or either maybe cut up the card. It’s a good thing to do right away. You can’t spend it if you don’t have access to the card or you lower your limit. If you know you’ve had spending issues and problems or close some cards. Maybe just get down if you had 7 or 8 cards may be going down to one or two of the lower limit. Just get some self-control and educate yourself, and I think even gotten as far as getting this consolidation loan. You’re smart enough to realize that you might have a problem and you want to learn from it.
Richard Hopefully, but the thought process will have started to move in that direction anyway.
Barry Exactly.
Richard Hopefully, yeah. Just to segway a little bit into the travel side of things that we’re going talk about a little bit later, Barry. I understand you’re a bit of a fan of travel rewards.
Barry I like travel rewards, with credit cards, yeah.
Richard I don’t fully understand them, but maybe it’s because I don’t take advantage of them like perhaps I should, I don’t know, educate me on this.
Barry Yeah, it’s pretty straightforward. You know, when you sign up for a new credit card to travel when they offer you a nice generalized sign up bonus. But there’s always conditions you got to spend “x” amount before “x” date, usually three months, right? And, then you earn points on all your purchases, which can then be redeemed for a discount on travel. The key thing is, as we already discussed, is, you have to pay off your balance in full every single month because what good is earning 3% in travel rewards if I’m paying close to 20% in interest, it makes no sense. But quite often people can just fool themselves into thinking that no, I deserve justification. When it’s a good deal, it’s quite often not, right?
Richard Let the emotional side of decision making take over.
Barry There’s no doubt a lot of people suffer from (fomo) fear of missing out. They see on social media what their friends are doing, and they know they can do it, too. But they have to put it on credit. And unfortunately, you know, sometimes you think its people who don’t have any money or low income. They’re taking (wrenches). But you know you could have a good salary and just abuse or credit cards at the same time.
Richard I see that a lot. In fact, that’s one of the reasons people get a lot of credit is because they have a good salary and they’re able to make the payments.
Barry Well, that’s the key thing we’re talking about travel rewards. The higher salary you get, you qualify for better credit cards, which better benefits, better rewards. It’s really easy to get more debt if you don’t pay it off.
Richard That’s for sure. On the subject of all of the travel and that, would it be advisable, and there are credit cards that lend themselves to this to have one or a couple of credit cards that are designed for travel and others for domestic use?
Barry Yeah, for me, it’s like it’s not like a travel credit card that you’re using just for travel. It’s just the type of rewards you’re earning, right? So you can use them domestically or internationally. There again, it’s the type of rewards you want to earn. And so you know, the West Jets got their own credit card, Aeroplan has theirs. But then each bank has their own travel program where you can earn points. That said there are certain credit cards that may are designed specifically for all in one use. Scotiabank released the passport credit card a few years back, which gives you no foreign transaction fee. So it saves you a minimum of 2.5% whenever you make a purchase in a foreign currency. So, yeah, you could argue that that is a great card to be using internationally
Richard Now that you mention foreign currency. I was going to ask you about are there cards that are advantageous in terms of what we call it currency exchanges?
Barry Yeah, definitely. So I mentioned that 2.5% in a lot of people who are watching us right now might be like, what are you talking about? I don’t get charged that fee. What they don’t realize is that it’s baked right into your exchange. So if you’re buying something in U. S. Dollars when you see the Canadian amount, the extra 2.5% is already in there unless you have a credit card that doesn’t charge foreign transaction fees. Fortunately, over the last couple of years in Canada, it’s become a big issue. So there are more and more credit cards available. There’s almost like 10 credit cards now that in Canada has no foreign transaction fees. But if you go back three years, there’s only two, so there are more and more options, and just each card is different so you got to do a little bit of research.
Richard I guess that the whole idea of transaction fees is another question, too, isn’t it?
Barry Yeah, it’s crazy how many fees we pay, right?
Richard How crazy is it?
Barry Well, I guess the foreign transaction fee is just 2.5% right, But it’s on any foreign currency like these days. People are buying things online, US dollars. So why pay a premium when you don’t have to? You just apply for one credit card that doesn’t charge you the fees and you save every single time. So it’s not like a huge amount if you’re buying something small. But over time it definitely adds up. The way I look at it, let’s just say I looked at all my trip expenses. If I was going to Italy, the amount in fees I pay could be the same as one nice meal while I’m there. So I’d rather have that nice meal than pay fees.
Richard Now you mentioned Currency exchange fees on that. But what other kinds of transaction fees should we guard against if we’re thinking of using credit cards?
Barry Well, you know, it depends like a lot of people you know, there are cash advance fees right where you don’t want to get into that because that’s where you’re paying to access money that you don’t have and you pay a higher interest fee, as far as credit cards are concerned….
Richard When you get a cash advance, usually you start paying interest on that money, right?
Barry Right away. Right? And yet pay a higher interest fee.
Richard And higher interest.
Barry That’s right.
Richard Is there a separate fee on this?
Barry There might be. It just depends on the terms of conditions of your card, every card is different. Generally speaking, most credit cards don’t have a fee when you use them, unless it’s a cash advance and international. But again, it really depends.
Richard So Barry, I said we’d eventually get into the travel side of things, right? Because our audience presumably is looking for some information and let us call them tips, on how to get that better bang for the buck.
Barry Sure.
Richard So, now I’m going to ask you for some tips.
Barry Yeah.
Richard But we’re going over to travel side of things.
Barry Okay. All right.
Richard So most of the people watching are probably are family people, have children and all that. What tips can you give us about getting more from, you know, a single family holiday, we’ll say?
Barry It really depends on your budget. So that’s where I like to start more than anything else. If you want to make travel part of your family life, you got to set money aside for it. You know a good example, and I’m throwing out a random number here, right? If you were able to put aside $500 a month, that would give you $6000 a year. That may seem like a lot of money for some people like, to put aside that amount. But, you know, I’m just throwing out these numbers there, just as an example. You have to remember that you can’t necessarily travel every single year. So if you don’t have that much amount saved, wait for next year, right? I didn’t try every single year when I was younger. But once you’ve got that money set aside, you could do whatever you want with it, right? Because the key thing is, you’re not dipping into your credit cards or any lines of credits to pay off for your traveling, and that’s where I like to start it and then, you know, based on what your budget is, then you start descending where you can go so If you’ve got a lower budget, maybe you take think about closer to home, road trips, right? Or taking advantage of the things that are going on where you live. A lot of events in the summer, you know, we’re based in Toronto. The city of Toronto throws on tons of events. You could spend every single weekend doing something within this city and not pay a penny.
Richard I know of some of those, you know, that’s part of the action, right? The idea that you’re trying to end your vacation with less debt or there’s no more debt than what you started with, right?
Barry You should never go into debt for vacation as far as I’m concerned.
Richard How do you like that straight line, Barry? Are there some things you can tell us about saving money on air travel?
Barry Yeah, well, the easy thing and this is really hard for families are the offseason travels obviously the quickest way to save money. You know, a good example is you to try to fly to Europe from Canada; you’re looking at, probably $1000 right. But if you were to go like, you know, right now, September or October, it may not be September or October when you guys are watching this, but the point is, it’s off season. A flight might cost you anywhere from $600 to $800, so you think about that’s 20% savings right there. On top of that, because you’re traveling during offseason hotels are typically 20 to 25% cheaper, also. Another easier way to save, in my opinion, is to literally sign up for every single newsletter out there, airlines, and tour operators. And the reason I say that is because they let their readers know right away when there’s a sale. So if you know there’s a sale and you can see discount another good example, Air Canada vacations quite often rent promotions where kids stay for free, right? That’s a great deal, but you just got to know about that promotion.
Richard And then they bombard you with this stuff.
Barry They totally do, because they want you to buy, they want you to spend with them, right? You do have a problem with those things is you got to have some self-discipline. There are some people out there who will see these deals and be like, why I got to go because it’s such a good deal. Well it’s not a deal if you got to pay back later and you don’t have the funds available
Richard It never is, is it? Combination bookings?
Barry Yeah, packages could be good. It depends on how you look at it. If you’re doing an all-inclusive resort, quite often, it makes more sense to go through, say, Air Canada vacations, Sun Wing, West Jet vacations. But if you’re also looking to book your flights, hotels and say, a car rental, is probably one of the best solutions. Yeah, they openly advertise it and I’ve read the numbers in the past and it works. And nice thing about Expedia is you don’t need to book all three things at the same time. So, let’s say, you book your flight and you decide a week later, you know, I’m going to get a hotel, and then another week later, you’re like, oh, I need a car rental. If they give you, like, basically a window where it’s as long as you book everything, eventually, you still get the savings.
Richard So you’re not locked into having planned everything.
Barry That’s right.
Richard Right down to the….
Barry Exactly. And they remind you, right, they’re like, hey, you know, you have two more weeks to save on X amount. So they want you to book with them, right?
Richard Really? Would they say that?
Barry They do.
Richard How do you feel about cruises and tours?
Barry Tours, I actually think are really good value. People don’t like tours because this is like, I don’t want to get on this big giant bus with, you know, 100 other people. And it’s not fun. Well, it’s an insane way to think about it. There are literally probably 1000 different tour operators out there, so it’s a matter of finding the right tour that makes sense for you, your lifestyle, and the type of adventure you want. I did a tour with Intrepid Travel a couple years back, and there are only eight people on the tour. It’s fantastic, right? And when you break down the cost of everything, meals that are included, which isn’t always included the guide, the accommodations and the transportation, it’s a pretty good value. More importantly, I hadn’t spent any time planning. Cruises are a little bit trickier because each cruise is so different. And what I don’t like about cruises is the fact that you basically pay a base price. You pay for every single upgrade, but you got to pay for gratuities. You got to pay for the nicer restaurants. Obviously, if you’re going to go to casino on the ship, you have to pay there.  There’s every day excursions to, right, so you could avoid all that if you wanted, but most people will spend a little bit extra on cruises.
Richard I’ve had a couple of people work for me who very, very, into tours, practically every year, the cruises, much the same thing because the big selling point to them was, they unpack once and they pack once.
Barry That’s right.
Richard It’s like their hotel moves with them.
Barry It’s experience, right? There’s no doubt some cruises like, you know, you think about the cruises that go through Scandinavia or the Mediterranean like, just think about planning that on your own, say, you pack once to take you there. It’s great. So I do actually think cruises can have a lot of good value. People just got to realize that it’s not necessarily just the base price you are paying. There will be extras you’re going to pay because you’re not going to sit on the ship the entire time while docked in some new exotic destination. You’re going to go explore, right? You’re going to go buy. Go shop.
Richard What you’re saying? Basically, is there two types of tours, right? Is the tour that essentially is focused on you just having fun. It’s almost like the casino tour where the casino goes with you and you dock here in there and you want to go off and buy some things at the local market or something? But then, the essence of the tour is what the ship can provide. I’m sorry, the cruise.
Barry Yeah. You’re basically paying for access to the cruise.
Richard The Mediterranean cruise that you mentioned, you’re going from here to there, and then you get off and you visit and you come back to your hotel. Your hotel moves over to the next place.
Barry That’s pretty much it. That’s exactly it.
Richard They’re different tours.
Barry It’s a unique experience. Where cruising it, is great. It can be fun, but not everyone’s into it.
Richard This kind of difference is between a cruise and a tour.
Barry Well, I’m talking about cruise ship versus a bus tour, right?
Richard Yeah. I know what you mean. The one the Mediterranean one that I described. There is more of a tour than a cruise.
Barry Well, no, it’s a cruise. If you’re on a cruise ship it’s a cruise, right? It’s not a tour, it’s a cruise.
Richard One lady I’m thinking about used to always say, I’m going on a trip.
Barry She’s going on a cruise, assuming she’s on a boat.
Richard I used to argue about that, too. Interesting. Is there any particular Garden of Eden out there for us? Is there any particular place that you recommend people to set their eyes on for in terms of this tour, cruise?
Barry Well, every time with destinations, it depends on what you are looking for. It’s so hard. Different budgets, right? Like I said, if you’re flexible, you can get a lot of deals out there as far as I’m concerned. Cruising, again, flexibility. Good examples, I was talking to my mother the other day and she found a cruise coming out of Vancouver about six nights ending in Los Angeles, including airfare. It was $1200. That’s like actually really cheap when you think about it, cause the flight alone was about $600. So, you know, 6 or 7 nights on a ship, some stops. It’s like you said, basically a hotel for a week that travels with you and all the meals. I’m like, that’s a pretty good price, right? That’s because she’s retired and she can just jump on a plane next week and it won’t matter, right?
Richard But for $1200 for a week. Most places you’ll stay will charge you close to that.
Barry Yeah, exactly, right?
Richard And it doesn’t move.
Barry But I also like to look at other destinations. To me, it’s kind of like, what’s trending and what has good value. It sounds a bit crazy, but, 5-6 years back, after Egypt was going through the Middle East crisis and Egypt uprising, as soon as they elected a new president, I was like, I’m going because it’s like they got a new president and everything’s safe. And more importantly, everything was like 50% off still. So sometimes you got to look at the situations around the world.
Richard Did you write about that?
Barry Take advantage. I think I did. I don’t remember.
Richard I think my sister in law must have read it.
Barry I’m not saying, like, you know, put yourself in any danger going. You were crazy, but you could be smart about your travels
Richard With credit cards, since they’ve replaced the traveler’s checks, what can you tell us about, number one is avoiding the devastation of losing all your cards and the inconvenience of things?
Barry Yeah, it’s tricky. You just got to be smart about your surroundings. Just be smart about how you use your credit card. Number one whenever you travel most of the times, you still need to let your credit card provider know that you’re traveling so you don’t get locked out when you make purchases. And being smart, you know, if you’re going to a heavy tourist area that’s known for pickpockets, you know, maybe you’re wearing your wallet in your front pocket or you put your bag in front of you. You can’t make yourself a target, right? I know it’s easy for me to say that, but you don’t need to be aware of your surroundings, and also people forget, is that when you go home, what you should also do is change your pins right away. Because in the event that used terminal that was compromised, they still usually need your pin to actually make a transaction. So even if they cloned your card, you change your PIN, it’s no good to them anymore.
Richard Right. Prepaid cards. How do you think of them in terms of travel?
Barry Depends on how you look at it, right? Like the old traditional prepaid cards that people are probably thinking in their heads right now, is where you could be able to take advantage of an exchange rate early, which is not bad, but prepaid cards, as weird as it sounds, it’s not always accepted everywhere. These days there are better prepaid options in the sense where you just, loadable credit cards like Stack and CoHo, that use a Visa and MasterCard networks that are more internationally recognized. I like them, but, you know how we’re talking about credit cards without foreign transaction fees. I still think that’s the cheapest way. So why would you go with the prepaid when you’ve got a credit card without foreign transaction fees?
Richard So in terms of travel, you’re not a big fan of them?
Barry Prepaid cards, not at all.
Richard For domestic use, so certainly, in my world, that prepaid cards are a very positive thing to have. I won’t explain why. This is about you talking about travel. But speaking of that, I understand that you publish or you have a guide called The Cost Of Travel. And my God, Barry, it’s free
Barry It is free.
Richard How does one get that?
Barry Just go to my website, and a box will pop up, saying sign up for my newsletter.
Richard Sounds tricky to me. Tell us what the guide covers?
Barry Literally, everything you need to know. A few things we already talked about, setting up your budget, how to save on flights, how to save on hotels, travel insurance, picking your destination. It’s just like a little guide I wrote. I don’t even remember how many pages; I think it’s like, 50 or something. Of all the travel tips I’ve learned over the years that have helped me save money. And funny thing is, once you know these tips, it’s like they’re just in your head. There’s nothing really special. People just don’t know how to take advantage of things that are right in front of them.
Richard And keep your back, back on the front.
Barry I guess technically, that saves you money.
Richard In the crowd. And on subways.
Barry There you go.
Richard So thank you very much for joining us.
Barry Yeah, no problem.
Richard Here’s a little gift. Put it this way, so that folks can see it. It’s a book. This is why we call this, The Glass Is Half Full. It was written to emphasize the value and the importance of attitude in turning whatever negative situation may find yourself in whether it be somebody stole your backpack or something when your Geneva or you just run out of, you’ve overspent on your credit card here in Toronto, doesn’t matter. A negative situation could be turned into a positive opportunity with the right attitude. I’m sure I tried to put that into print. Thanks again for joining us!

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