Beware the New Account Inactivity Fee for BMO MasterCard !

For several years, BMO MasterCard has had a fee for people who don’t use their card much. Specifically, if you had a credit balance on your card (perhaps because you over-paid a bill or received a refund for an item back to your card account) and if you didn’t use the card for 12 months, they would charge you $10 and take it out of your positive card balance. This year, however, they have started charging a fee to everyone!

Who Will Get Charged the BMO MasterCard $10 Inactive Card Fee?

If you don’t use your MasterCard one month, the clock will start ticking. If, eleven months later, you still have not used the card, they will bill your card $10.

What Can I Do To Keep My BMO MasterCard Active?

To avoid the fee, you need to

  • buy something that bills your credit card
  • receive a refund on your credit card account
  • pay interest on a balance on your credit card, or
  • pay other fees on your account, perhaps a fee for a cash advance, for example

at least once every 12 months.

How Can I Remember to Keep My BMO MasterCard Active?

You may want to set it up so that an annual or semi-annual bill is charged to your credit card account.

Of course, you’ll need to make sure you remember and pay the credit card bill or you could end up with a huge amount of interest due!

Why Would Anyone Keep a BMO MasterCard If They Are Not Using It?

Many people keep a credit card as a “backup” card in case their usual card is unavailable. This secondary card may seldom get used.

Other people don’t buy much on credit and may simply forget to use it for a year.

Some people also keep an older credit card “open” to maintain the information about the card on their credit history with Equifax and TransUnion.

Are There Any Other New Fees or New Fee Explanations (for 2016) for a BMO MasterCard?

Other fees that they are emphasizing include Cash Advance Fees and Dishonoured Payment Fees.

If you get a cash advance from your BMO MasterCard using

  • BMO Telephone Banking (whether self-serve or through an associate answering your call) or
  • through BMO Online, or
  • through BMO Mobile, or
  • through BMO Tablet Banking

You will be charged a fee of $3.50 in addition to any interest charges on the advance and any other fees, including currency conversion rates.

I thought they had stopped issuing MasterCard cheques but apparently not because there is also a fee if you bounce one.

If you write a MasterCard cheque that exceeds the amount of credit available on your account, it will bounce. (They will refuse to cash it.) If you do that, they will also charge you a fee of $40-$48.

So watch out that you don’t write a cheque at the same time as your pre-authorized bill payment appears on your credit card balance or you could get a nasty fee surprise.

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How Did My Income Tax Program Use Up All of My Tuition and Education Amounts So Quickly?

When you’re still attending college or university and not make much money it’s common to end up carrying forward large amounts of tuition and education amounts. It can look like you have tens of thousands of dollars to use to reduce your income tax payable. Yet when you start working full-time you may find the tuition and education amounts get used up way more quickly than you expect: here’s why.

A Common Mistake: Thinking Education and Tuition Amounts Reduce Your Taxes Dollar for Dollar

When you see big $$$ values in your carry forward tuition and or education amounts, you may start thinking it will be years before you have to pay any income taxes. After all, if you have $40 000 in carry forwards, and you’re only making $35 000 a year, they should last a long time, right?

Unfortunately, no.

The government loves making it SOUND like you are getting a big deduction.

So they say things like “You can write off $500 of your child’s fitness expenses!” They don’t say “And it will get you a whopping $75 off your taxes payable!” But that’s all the $500 saves you: $75 in federal tax payable.

Your Education and Tuition amounts do no reduce your taxes payable dollar for dollar.

How Does the Income Tax Math Work for the Education and Tuition Amounts?

Let’s look at an example.

Say you earned $35 000 in 2015.

According to the 2015 Ernst and Young personal tax calculator, in Ontario, with no extra deductions, that would mean you would owe about $4 820 in tax, most of which should have been deducted by your employer.

You don’t use up $4 820 of your education amounts though to reduce this tax payable to 0.

The education/tuition amounts are converted into credits at a really low percentage.

Line 23 (also called 323) on your Federal Schedule 1 is the amount of the education/tuition claim you are using up.

As you can see further down on Line 32 you apply a rate of 15% to that amount.

So to negate $1000 of tax owing, you have to use up $6 667 of your education/tuition amount.

To reduce your $4820 of tax owing to 0, it will use up $32 133 of your carried forward education and tuition amounts.

You would then get a tax refund of up to $4820 depending on the amount of tax that was with-held from your pay cheques and your other deductions and credits.

Don’t You Wish the Education and Tuition Amount WAS Applied $ for $ Against Your Taxes Owing?

If the education and tuition amounts were applied $ for $ against your taxes owing, it would be great, because it would mean the government was paying for your schooling.

Unfortunately, they are only willing to pay for 15% of your schooling. (Plus a bit more if your province gives you a tax break on your provincial taxes.)

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Did you get a great tax refund the first year you worked after finishing college or university? Don’t you wish you could get a refund like that again? Please share your views with a comment.