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Canadian Guide to Protecting Your Wealth from Inflation

October 19, 2021 by Ben Leave a Comment

Inflation is on the rise in Canada and rose to 3.7 percent in July, 2021. This is the biggest jump since May, 2011 and is mainly due to more sectors of the economy reopening and consumers having where to spend their money. While pay rates are set to trail inflation, salary increase budgets are unlikely to catch up with inflationary pressures in 2021. Plus, it is not guaranteed that salaries will go up across all sectors of the economy. Inflation is robust but fortunately, there are ways to protect your wealth and fight the effects of inflation. From buying real estate and investing in stocks to alternative investments and portfolio diversification, there are time-tested strategies to protect your money.

1. Buying Real Estate

Investing in real estate may sound counterintuitive given that the average selling price is $688,000. Prices rose by 38 percent in 2020 alone. In most cases, Canadians looking to buy a home need to apply for a loan. As it turns out, however, the cost of borrowing decreases when wages increase and prices are on the rise. Average home prices are also rising faster than the consumer price index which makes investing in real estate a good hedge against inflation.

Additionally according to the Canadian Real Estate Association, home prices tend to be skewed by listings in expensive metropolitan markets such as Vancouver and Toronto. CREA tracks the house pricing index which gives a more accurate picture in terms of the types and number of properties sold.

2. Investing in Stocks and Bonds

There are investments that actually benefit from inflation, such being energy and retailers stocks. Energy companies profit when inflationary pressures are driven by oil price increases. Retailers also hike prices and considering the pandemic e-commerce boom, investing in e-commerce stocks can be a good idea.

Some equities both benefit and contribute to inflationary pressures, for example, metals, grain, lumber, and crude oil. It makes sense to buy shares in commodity companies either through mutual funds and exchange-traded funds or directly.

Investing in government bonds is yet another way to protect your money from inflation. What portion to dedicate to fixed income depends on how soon you will need cash and your risk tolerance. As a rule, government bonds offer income and security but the shorter the maturity, the lower the yield. That is because investors face less risk of interest rate increases. Bonds with longer maturity are more sensitive to interest rate fluctuations. The choice of shorter maturity depends on factors such as income requirements, nearing retirement, and the need to diversify investments.

3. Alternative Investments

The price of alternative investments such as silver, gold, and cryptocurrencies is also rising in the long run. As they are risky, dedicating a small portion to alternative investments only makes sense. At the same time, they are thought to not only retain their purchasing power but to outperform when inflationary pressures arise.

Also, there is a wide array of investment options to look into, besides bonds and stocks, each with its proposition, value, and risk factor. The range of solutions includes derivative contracts, commodities, antiques and art, managed futures, hedge funds, venture capital, and private equity.

The category of alternative assets is vast, indeed, but there are some factors to consider when building a portfolio. First, investors can choose to own assets such as farmland, commodities, precious metals, and real estate indirectly or directly. They can either buy physical assets or shares like, for example, invest in shares of gold or gold bars. The same is true for other assets such as real estate or farmland. When buying shares, the asset is tied to physical property, thus giving investors a choice between financial and physical assets.

Some alternative investments are classified as risky, such being the case with farmland. The value of farmland has steadily risen on an annual basis over the last three decades. There are no signs of slowing down in the short term, given the demand for commodities and agricultural products. In fact, farms will need to significantly increase production to meet growing demand as global population growth continues.

An alternative solution is to invest in inflation-linked bonds which are pegged to the consumer price index. In this case, the interest and principal rise and are adjusted for inflation. There are many benefits to investing in inflation-linked bonds such as less risk and volatility and higher returns compared to conventional bonds. A word of caution should be mentioned here, however. When deflation occurs, the bond principal will fall below par value, with interest due on the inflation-adjusted principal. Investors are likely to incur capital losses if deflationary pressures persist. The longer the maturity, the more vulnerable bonds become to interest rate fluctuations.

4. Portfolio Diversification

Building a diversified portfolio is an excellent hedge against inflation. The types of assets that can protect an investment portfolio against inflationary pressures include US stocks and REITs, treasuries, TIPS, commodities, emerging stocks, gold, European and Pacific stocks, and international REITs. Real estate investment trusts, for example, buy a diverse range of real estate that is rented out and produces solid returns. There is also an option to invest in international and US REITs and many have done so since the 2008 US market crush. The fact is that REITs invest in both commercial and residential real estate and are more diversified than conventional real estate portfolios. This means that they are more stable and less risky in case of rising inflation and economic shocks.

5. Consider a Fixed-Rate Mortgage Loan

There are currently variable-rate mortgages offered at about or even less than 1 percent. Getting a variable-rate mortgage sounds tempting as it looks like borrowing for nothing but it comes with a hitch. The fact is that a significant increase in mortgage rates could translate in hundreds and even thousands of dollars in interest over the loan term.

In comparison, five-year fixed-rate mortgages are currently available at about two percent. Regardless of inflationary pressures and rate fluctuations, borrowers pay two percent over the course of the mortgage. Locking in a variable-rate loan is a good idea when inflation is rising.

Investing in stocks, alternative assets, and real estate is worth considering given that high inflation could last for years. According to chief economist with Bank of Montreal Douglas Porter, inflation rates could remain at 3 – 5 percent for a year or even two. The outlook for the U.S. is similar, with prices and inflation rising until 2023. In fact, inflation south of the border is higher than in Canada, reaching 5.4 percent in June. Canada, however, is behind the U.S. on the path to economic recovery which is a red flag when it comes to recessionary pressures. Investing in physical and financial assets now can help mitigate the effect of expected rising inflation. With a variety of inflation-proof stocks such as energy and utilities and exchange traded funds, there are plenty of options to hedge against inflation.

Home Trust Credit Cards and Financial Solutions

September 2, 2021 by Ben Leave a Comment

One of the largest trust companies in Canada, Home Trust features a selection of financial solutions, including credit cards, commercial and residential mortgages, and deposits. It is one of the few providers to offer secured cards to subprime borrowers who are looking to rebuild or improve their credit profile.

Company Overview

Established in 1987, Home Trust is a leading financial service provider with offices in Toronto, Winnipeg, Halifax, Montreal, Calgary, and Vancouver. It is a subsidiary of Home Capital Group, the largest provider of uninsured mortgages. Home Capital offers a wide choice of financial products, ranging from government-mortgage securities and TFSAs to investment certificates and short term deposits. Being a wholly owned subsidiary, Home Trust features a selection of guaranteed investment certificates tailored to the needs of commercial and individual customers. To clients who need to rebuild credit, Home Trust offers secured credit cards with cashback rewards, shopping security, and travel benefits.

Home Trust Credit Cards

Home Trust offers three types of credit cards, along with convenient online services to pay bills, access statements, and monitor spending behavior.

Home Trust Preferred Visa

Available nationwide except in Quebec, this card features a unique combination of benefits. It earns cash back on eligible purchases and charges no annual fees. The fact that this Visa card by Home Trust offers travel benefits such as guaranteed hotel reservations and no foreign transaction fees makes it a valuable asset for those who travel frequently, either for work or for leisure. While cash back is not offered on purchases in foreign currency, users earn 1 percent on all transactions at home in Canada. Money back is offered on daily purchases such as monthly bill payments, groceries, and gas. There is a convenient online calculator to check earnings based on approximate monthly spending. Added incentives for customers are emergency cash and card replacement, purchase security, and no cap on cashback earnings.

The Home Trust Preferred Visa is available to customers who are permanent residents of legal age and are not currently in bankruptcy. Only applicants with an annual income of $15,000 or higher quality for this card.

Annual fee: none
Interest Rate: 19.99 percent
Cash advances: 19.99 percent
Grace period: at least 21 days

Home Trust Equityline® Visa

For those who own their home, this is an option to tap into their home equity and access a secure line of credit. It can be used to pay for college, cover operating or start-up costs, finance home remodeling projects, or consolidate debt. Home Trust also offers an easy-to-use online calculator to calculate interest savings when consolidating debt. To determine their savings, users are asked to enter their current interest rate and balance. Consolidating $20,000 in debt with 22.99 percent interest, for example, saves $2,600 in annual interest payments.

With Home Trust’s Equityline® Visa, users benefit from a revolving line of credit that can be as high as $10,000. Added perks are low interest rates, no prepayment penalty, cash back on purchases, and no foreign exchange fees. Users get 1 percent back on qualifying purchases for no annual fee. This Equityline® Visa charges no foreign transaction fees, whether shopping online or using the card abroad.

Annual interest rate: 9.99 percent
Cash advance rate: 9.99 percent
Annual fee: none
Interest-free period: at least 21 days
Mortgage title fee: up to $781

Mortgage discharge fees vary by province as follows: Ontario – $295, the Maritime Provinces and Manitoba – $200, British Columbia – $75, and Alberta – $0.

To apply, customers are asked to provide employment and address information, along with details about their mortgage and property, including annual taxes, purchase price, and estimated home value. Additionally, applicants have to provide information about their liabilities and assets and the intended use of the funds, whether it is home improvement, debt consolidation, or anything else. Personal details to include in the application are number of dependents, marital status, and current residential address.

Home Trust Secured Visa

This card is a good choice for those who are looking to rebuild credit and for young people with limited or no credit exposure. It has been rated #1 secured card in 2021 by creditcardGenius and for a good reason. Users can choose from a no annual fee or low interest option and are free to set their own credit limit. The deposit amount can be as high as $10,000 and as low as $500. The best part is that almost everyone gets approved. The fact that monthly payments are reported to the major bureaus expedites credit improvement.

While customers with good or excellent scores could be better served by another card with travel or cashback benefits, Home Trust’s Secured Visa enables users to control their spending and works just like an unsecured credit card. Holders can use it to set up accounts, pay bills, and shop online.

Interest rate: 19.99 percent
Annual fee: none

Interest rate: 14.90
Annual fee: $59 percent

Interest-free period: at least 21 days
Foreign currency conversion: 2 percent

To apply, customers fill in an online application and provide details such as annual income, business phone number, employer name, occupation, and employment status. They are also asked to indicate a security deposit and confirm whether they are a close associate or family member of a head of international organization or a politically exposed domestic or foreign person. There is also an option to add an authorized user for a monthly fee of $2 or annual fee of $19.

Benefits for Users

Home Trust offers a number of benefits to card users, among which affordable interest rates, cash back, online account management, and access to home equity. All cards come with Visa purchase security by Alliance Company of Canada or Royal Sun.

Those who opt for the secured option can use it wherever VISA cards are accepted. Paying the balance on time allows users to build credit and apply for a range of financial products with lucrative rates and rewards. Secured cards are also a better alternative to prepaid cards which are not accepted by all retailers. Whether holders are up to date on their payments or not, prepaid cards have not effect on credit ratings.

Overall, Home Trust is a good financial services provider with a wide choice of product offerings. Perfect for basic banking and financing needs, Home Trust offers secured and unsecured VISA cards with no annual fee, hotel reservations, and other benefits. Online shoppers and travelers enjoy the double benefit of no foreign transaction fees and earning cash back on purchases. In addition to access to credit, customers are offered a range of business and residential mortgage products, including refinancing and renewals, together with high interest deposit solutions and guaranteed investment certificates. Additionally, Home Trust offers customers handy financial resources and information regarding home ownership, holiday spending on a tight budget, the impact of debt on credit rating, and plenty more.

Cryptocurrency in a Nutshell

August 17, 2021 by Ben Leave a Comment

A cryptocurrency is a form of virtual or digital currency that can be used to pay for services or products or to trade for profit. The fact that an unregulated currency is traded for profit, sometimes in significant volumes, drives prices up, which is why finance experts warn for a near-future collapse of a speculative bubble. At present, some 10,000 virtual currencies are publicly traded, the most common types being Bitcoin, Cardan, Ethereum, NEO, Steller, and Ripple.

Is Cryptocurrency a Speculative Investment?

Demand for alternative currencies has grown over the past couple of years, mainly because of the significant volume of money printed by central banks. Money printing drives interest rates down, and more people are willing to borrow and make large purchases. At the same time, a low-interest environment means less profit for speculators trading traditional investment instruments, making them look for profits elsewhere. On a macro level, companies such as MicroStrategy, Tesla, and Galaxy Digital Holdings have significant bitcoin portfolios. Analytics platform MicroStrategy uses bitcoin as its main reserve asset, currently holding over $3 billion. Individual investors are increasingly using fintech apps which have made it easier to trade cryptocurrencies.

There has been a lot of hype around bitcoin but investors and central bankers warn that cryptocurrency is a speculative investment. That is because it is an asset that is overvalued. In a recent article, Financial Times also highlighted the fact that bitcoin lacks a foundation to become an international currency. Another article called it a pyramid scheme much to the surprise of traders. Pyramid schemes are eventually bound to collapse if there are no new traders coming in.

Is Bitcoin Here to Stay?

This is a difficult question to answer and largely depends on whether crypto fits into the traditional roles of currencies. They act as both means of exchange and store of value. Currencies are also used as monetary policy instruments to regulate interest rates. Given the short history of bitcoin, it is difficult to tell whether the cryptocurrency can act as a store of currency. Its value is also volatile unlike standard, more reliable means of exchange. Third, cryptocurrencies are not issued by central banks, which makes it impossible to assess performance based on trade balance and inflation data. There is no way to tell whether bitcoin is expensive or cheap at any given moment.While many argue that crypto is not a viable currency option, others believe that bitcoin is here to stay. Notably, Anthony Hardy, research analyst for Franklin Equity Group points to the fact that technological advances and digital scarcity are the driving forces behind an alternative financial system that is to stay and experience growth.

What’s the Endgame of All the Speculation?

According to economist at Deutsche Bank Marion Laboure, less than 30 percent of the transactions in crypto are for the payment of goods and services. The remaining volume is investment, speculation, and trading. The problem is that bitcoin has a low liquidity as an investment instrument. Low liquidity means that it is difficult to sell, and investors may incur bigger losses as a result.

Jon Danielsson from the London School of Economics also explains that the current bitcoin hoarding and concentration of ownership can hypothetically result in a currency gap divide and give birth to the first multibillionaire. In this sense, the claim that the use of cryptocurrencies results in market democratization is ungrounded. In his view, virtual currencies cannot coexist with standard ones, and it is an all or nothing game. If bitcoin is to replace all the G20 currencies currently in use, then each bitcoin will be valued at $1.5 million. This would lead to a systemic crush. According to Danielsson, crypto is a bubble and while it makes sense to get the most out of it, it is wise to get out in time.

Why Bitcoin?

Bitcoin grew in popularity over the last ten years thanks to three communities of users – speculators, blockchain technology fans, and true believers. It was created with a philosophy behind it – it wouldn’t need a central bank to regulate activity. With prices skyrocketing, however, bitcoin became the next hype in investing and a vehicle of a financial system that it was designed to replace.

The main driver behind its success has been general distrust of financial institutions and the system as a whole. And this is precisely why bitcoin was launched – to take trust out of the system. The timing was also right. Bitcoin was created in 2009 when the global financial crisis cost millions of people their homes, savings, and jobs.

There is also the idea that the state and its systemic elements act as a force for violence. This would then mean that the currencies in circulation are a form of monopoly. Using a cryptocurrency is, in this sense, a form of opposition to state governments. Bitcoin mining is also part of this as traders look at it as a commodity and not as currency.

In 2019 bitcoin and other virtual currencies were already being traded by mainstream investors, hedge funds, venture capital firms, and bitcoin whales. And while crypto has become popular indeed, this came with a cost. For one thing, bitcoin mining consumes a lot of energy. According to estimates by the Cambridge’s Centre for Alternative Finance, electricity consumption accounts for around 0.65 percent of the annual global consumption. It also produces greenhouse gas emissions or about 22 – 23 million metric tons of carbon dioxide. This is the equivalent of the emissions generated by Sri Lanka and Jordan.

Conclusion

Bitcoin was created by a person known as Satoshi Nakamoto. No one has so far discovered who he is or was, and his identity has never been revealed or verified. The crisis in confidence in the financial system seems to have ended. Yet, the biggest winners appear to be the same people that a decentralized system attempted to disempower – banks and institutional investors.

Much is also to be learned about cryptocurrencies as an evolving technology. Additionally, some finance experts claim that there is a better approach to using a decentralized cryptocurrency. Consider Facebook’s own payment system Diem which is a blockchain-based type of a system. The idea behind it is to eliminate additional fees and transaction costs and to facilitate international payments. According to Professor Grundfest, former Securities and Exchange Commission commissioner, the adoption of a new currency would not reduce the cost of payment transactions. A better alternative would be to establish its own bank as the main financial institution for Facebook users. This would allow the company to create banking systems for different regions and states which will be better positioned to reduce costs and meet regulatory requirements. Once multiple banking systems have been created, they can be linked together to create a single global network.

Stable coins have also gained in popularity as means to back virtual currencies with a tangible asset. The problem with this approach is that it will make it easier for people to con the system because it is not as easy to control as traditional currencies. One possible use of cryptocurrencies is in states with weaker currencies where it may be better to invest in crypto than in local bonds and stocks.

Why Is the Real Estate Market in Ontario Cottage Country Booming?

July 19, 2021 by Ben Leave a Comment

When the pandemic started, real estate experts warned that home prices would decline due to recessionary pressures. Yet, after a brief downturn last spring, the market not only experienced a boom but this appears to be a lasting trend. The demand for cottage properties is growing for several reasons. One is that many Canadians are working remotely, and many information professionals choose to move to small towns and the countryside. Second is the fact that the border is closed except for essential travel. It is not clear when Canadians could board a plane, hence is the demand for cottage properties to have a vacation at home and within a commuting distance. Third is the fear of inflation and growing real estate prices as inflation has crept a little higher. But there is more driving prices up than remote working, closed borders, and inflationary fears.

Undersupply of Cottage Properties

There has been an undersupply of decent cottage properties in Ontario. The market imbalance is due to a combination of economic, demographic, and historical factors that created supply shortages even before the pandemic. Take Airbnb, for example. The concept behind it was to create a platform that is part of the sharing economy. Yet, the idea of renting out an extra room to make money on the side has proven attractive, and many choose to rent out, creating a shortage of properties for sale. The booming tech industry is also a contributing factor. The tech sector grew by over 50 percent by 2019, with more than 240,000 jobs in the GTA. Think of Shopify, Kik Messaging, Thelmic Labs, Google, Desire to Learn, Open Text, and many more to mention.

Labor shortages over the years resulted in construction delays. The reason for delays is not enough skilled labor. Additionally, the equipment required to build sewer systems and roads is expensive to maintain, run, and buy. Builders and local governments choose not to buy a lot of equipment because of the shortage of land to build on. There is also the demographic factor, with baby boomers moving to the countryside and not into condos in Toronto. Finally thanks to GO Transit’s commuter rail services, Toronto is now connected to the rest of the GTA. Many people choose to buy homes within a commuting distance to Toronto, thus contributing to an already existing housing shortage and growing demand.

Another reason for the shortage of supply is that cottage owners are less willing to sell compared to homeowners in Toronto. As Chestnut Park CEO Chris Kapches explains, the sale of cottages is typically discretionary “unlike sales in urban environments that are often driven by necessity”. The result is that cottage supply is further dwindling. Given the competitive market and low stock, real estate is now sold in about 23 days while in 2017 properties were sold in 132 days on average.

Because of the chronic undersupply of properties, the number of homebuyers looking to invest in cottage estate now exceeds the number of listings.

Pandemic-Driven Demand

Work from Home

The pandemic has proven information knowledge professionals that they can work from anywhere where they have a stable Internet connection. With travel restrictions and social distancing protocols still in place, cottage life has become more desirable, and survey results prove this trend. A survey published by CTV News show that 47 percent of young people aged 25 – 35 would choose country or small town living. Close to 2/3 of Canadians aged 25 – 40 also say that they prefer to work remotely if given the option. A 2021 survey by Remax also shows that 57 percent of Canadians in Atlantic Canada prefer country living. Overall, 47 percent of Canadians across all age groups would like to live in the countryside.

The pandemic has caused a mindset shift that is likely to stay. The blurring of recreational property and primary residence is at least in part resulting from the blurring of home and work from home. Even occupations with the highest level of proximity have seen and are likely to see further transformation after the pandemic subsides. This is the case with frontline workers who interact with customers in post offices, financial institutions, and retail stores. Work has partly migrated to digital transactions and e-commerce to curb the further spread of the virus. The computer-based office work sector is largely teleworking. It includes office settings in factories, IT companies, courts, hospitals, and financial institutions. This sector accounts for about 30 percent of employment in advanced economies such as Canada’s. Virtual meetings and remote work have become the norm in administrative settings, and this trend is likely to continue.

In fact, data by Statista shows that 24.2 percent of Canadians would like to work most hours from home and 14.7 percent prefer remote work altogether. Additionally, 40.8 percent say they would like to work half of the hours outside and half at home. Only 9 percent of Canadians prefer to work outside the home. As the pandemic has proven employers that remote work can be as productive as working from the office, this shift is likely to be permanent, with many choosing country living.

Low Interest Rates

The demand for rural properties has led to bidding wars that real estate agents have rarely witnessed. Cottage prices are forecasted to grow by 17 percent in 2021 due to the buying frenzy since the onset of the coronavirus pandemic. In addition to remote work, demand for recreational properties is driven by historic low interest rates. The pandemic and following containment measures imposed across Canada have plunged the economy into severe contraction, causing widespread unemployment. Recessionary pressures also caused interest rates to drop to near historic lows. In response to the pandemic, the Bank of Canada cut the key rate three times in March 2020 alone. Depending on the situation buyers are in, low interest rates on mortgage loans could mean significant savings. Additionally, some homebuyers saved money because they haven’t been able to travel overseas.

Demographic Profile of Buyers

People looking to buy a recreational property are quite diverse when it comes to demographics and age. Some of the homebuyers are families that send their children to summer camps. As sending kids to camps is not an option and might not be for some time, they want to buy a recreational property in a similar setting. Others usually travel abroad during the summer months and are starting to realize that vacationing abroad might not happen as much over the next couple of years. Still others want to invest in a rural property to keep their families safe. There is also a group of people that are interested in buying a property and change their lifestyle.

Refresh Financial – Improve Your Credit Score with Secured Credit Card

June 22, 2021 by Ben 1 Comment

Refresh Financial offers a range of products, services, and tools, including AI-enabled product recommendations, automated credit coaching, credit report and score monitoring, and secured credit cards. By offering financial literacy programs, Refresh helps customers to improve their money management and savings skills to make better financial decisions and achieve their long-term goals. Common situations in which financial literacy helps are using credit cards, managing debt, investing, reducing expenses, purchasing a home or car, sticking to a budget, and saving for retirement.

Refresh Financial and Borrowell Acquisition

Refresh Financial takes a new approach to consumer financing. The company offers loans and credit cards to customers with poor or no credit to aid their credit improvement efforts. Established in 2010, Refresh has offices in Ottawa, Kelowna, and Hamilton. As of January 2021 Borrowell closed the acquisition of Refresh Financial and raised $25 million in funding. All-equity financing was secured by a group of new investors, among which iA Financial Group, BDC Capital, and Kensington Capital Partners. Existing investors such as Equitable Bank and White Star Capital also provided funding.

One of the largest financial tech companies in Canada, Borrowell specializes in digital wealth management, digital banking, and alternative lending solutions. Their online lending platform utilizes AI-powered technology to offer customers product recommendations, free credit scores, predictive cash advances, bill alerts, money management and monitoring solutions. Founded by Andrew Graham in 2014, Borrowell offers a wide range of financial tools and products, including mortgages, credit cards, and personal loans. The platform is backed by a network of mortgage brokers, investment funds, and institutional lenders such as FirstOntario Credit Union and Portag3 Ventures.

Canadian Market for Secured Credit Cards

Refresh Financial and Home Trust are among the few Canadian financial service providers that offer secured credit cards. Targeting subprime borrowers with average and poor credit scores, secured cards function much like standard ones, the only difference being that customers pay upfront cash deposit. The deposit serves as a guarantee for financial institutions should the borrower miss a payment. Issuers can keep the cash deposit when borrowers default on payments.

Essentially, a secured credit card can be a helpful tool to build or rebuild credit. Using a debit or prepaid card or cash to make purchases or pay bills will do nothing in terms of credit score improvement. That is because payments are not reported to the major bureaus. When used wisely, a secured credit card enables borrowers to reestablish credit and demonstrate responsible management to the reporting agencies and financial institutions. Once approved, borrowers can use the card for things like making purchases, paying everyday expenses, or booking a vacation.

Consumers who use their card responsibly build credit over time. Common reasons why this is not happening include having one type of credit only, errors on the customer’s credit report, missed payments, and a utilization rate above 35 percent.

Refresh Financial Products Offerings

Refresh offers a credit builder loan and a secured card, along with a suite of tools for responsible debt management. In addition to reporting customer payments to TransUnion Canada and Equifax, it also features useful financial tools such as score simulators, credit alerts, debt calculators, and goal managers.

Refresh Secured Card

This card is backed with a security deposit which determines the credit limit. The limit can be as low as $200 and as high as $10,000 depending on how much the borrower is willing to put on hold. The deposit aside, this card by Refresh works just like a standard card, allowing users to make in-store and online purchases while gradually rebuilding credit.

This secured Visa by Refresh Financial is a good choice for borrowers with no or bad credit who are turned down by brick-and-mortar banks. Virtually all applicants get approved as there is no minimum income requirement. This card is a particularly good fit for customers who want to make a small deposit and for people with a history of delinquencies and bankruptcies.

Refresh also offers a handy online calculator to help customers check their utilization rate. Customers with a credit limit of $1,000 and a balance of $400, for example, have a utilization rate of 40 percent. The optimal rate for credit building is 30 percent and should not exceed 35 percent.

Cardholders who pay the balance in full avoid interest charges. There are two options to make payments toward the card balance – either through online banking or via pre-authorized debit. Once the payment has been received, it is first applied to any interest due and then to cash advance, annual card, and other fees.

Interest rate: 17.99 percent
Maintenance fee: $3 per month
Annual fee: $12.95

Credit Builder Loan

This financial product by Refresh Financial is nothing like a traditional loan. Instead of borrowing a lump sum and paying the principal and interest over the loan term, customers are charged monthly fees plus interest. Basically, this is a form of installment credit whereby customers pay back the full amount in equal installments. The best part is that payments are reported to the major bureaus as proof of responsible debt management.

Customers are free to cancel their loan at any time by logging to their Refresh Dashboard. Once the loan has been cancelled, it cannot be reactivated. Clients are free to withdraw their available funds, and the money will be deposited in their bank account within 10 – 15 work days.

There are two package options for customers to choose from – apply for a credit card and cash loan or take a loan first and get a secured card later. With the first option, customers have access to two lines of credit and enjoy spending flexibility. The main benefit of having two lines is that responsible use shows financial institutions that the borrower can manage both.

Interest rate: 19.99 percent
Loan amount:
$25,000
$10,000
$5,000
$2,500
$1,500

There are further benefits to taking a credit builder loan, one being that customers are assigned a dedicated relationship manager. Relationship managers act as a single point of contact and help borrowers to build a financial plan to meet their long-term goals. The goal is to make the customer’s banking experience more convenient and smoother by bringing expertise across a range of financial solutions. With experience and knowledge of personal banking, borrowing, and credit management, dedicated financial managers offer clients finance-related recommendations based on their needs.

Summing Up

Overall, Refresh Financial is a good choice for borrowers who got the short end of the stick and need to rebuild credit. Each of their products, the Refresh Secured Visa and credit builder loan are meant to help consumers, with payments being reported to the credit bureaus. Qualifying for a loan or credit card is simple and boils down to the customer’s ability to meet future payments, including product fees and interest charges.