Functioning a bit like a payday loan, only for more money and a slightly longer term, instalment loans are unsecured high-interest loans given out to borrowers with poor credit, often at rates approaching the legal maximum allowed.
There’s about $ 132 billion of such debt in Canada, a little under 10 per cent of the total. But it’s growing. The industry says it fills a niche of serving people who’ve slipped through the cracks of the banking industry, helping them get back on their feet. But others, including one former employee we spoke to, say most customers don’t understand the true cost of borrowing.
Another story that resonated with our readers this week was this one, based on a report from think-tank the Canadian Centre for Policy Alternatives, that says high mutual funds are costing many Canadians years of their retirement, or forcing them to live on less.
According to the report, mutual funds that charge in the range of one per cent, two per cent or more to manage the money for a year slowly erode investment returns. A two per cent MER on a fund may not sound like much, but it adds up over time — hundreds of thousands of dollars over a working life.
The solution? Pensions, the report claims. Pension fund managers ostensibly do the same thing mutual fund managers do, but for a fraction of the costs, with the average pension fund withdrawing less than 0.4 per cent of their funds to pay the bills last year.
Few government programs have ever been met with as much universal support as TFSAs did when the federal government introduced them in 2009. But now, with rumours abounding that the feds are about to double the contribution rate to $ 11,000 a year, many have started to question the wisdom of that.
Two separate reports this week said doubling the limit would result in a larger tax break for Canada’s richest savers who are already benefiting from the program, but do nothing for most people. A report from one of the economists who advised the government to create the accounts in the first place said if Canadians are allowed to put in twice as much every year, it will eventually cost the government $ 15 billion a year in lost tax revenue in 40 or 50 years.
It’s a complex issue, which explains why no less an authority than the Parliamentary Budget Officer weighed in this week. And he, too, said doubling the rate would be a ticking time bomb in lost taxes.
Canadians are going to need every penny they can get their hands on for their retirement, thanks to the cost of living increasing the way it usually does. On Thursday, Statistics Canada reported that Canada’s inflation rate dropped to 1 per cent last month. The main reason was cheaper gasoline, because virtually everything except energy prices ticked higher.
The monthly inflation figure is often a source of much skepticism, as the official rate often feels way off from what people witness in their own lives. So how can we be sure StatsCan knows what it is talking about? Thanks to an army of price checkers across the country who diligently go out every month and compare prices for thousands of items.
The CBC’s Peter Armstrong interviewed one of those price checkers this week, and the result was this story explaining it all. It’s a great piece of video if you haven’t seen it, and gives a fun glimpse into how they come up with a number that almost everyone has heard of, but few people understand.
Those were some of our big stories this week. Be sure to check out our website often for more, and don’t forget to follow us on Twitter here. In the meantime, here’s some more of our best work this week.