On this blog, we often talk about credit cards and mainly, the evil of them when compared with other means of borrowing such as HELOCs and other types of second mortgages. But, RBC has come out with a card so different, so clever, that it may make it difficult for some borrowers to decide on which way to go.
The RBC MyProject MasterCard really is a credit card with a difference. Instead of applying for one, using the credit monthly, and then paying off a portion of the interest and/or principle every month for eternity, the MyProject card works like a credit card/loan. When you first get the card, you can use it for just about anything that you want – home renovations, weddings, and anniversaries are just a few of the examples that the MyProject brochure gives you. You have up to $40,000 to spend and for the first six months, you don’t have to pay absolutely anything for it – no principle, no interest. At the end of that time, the payments will start.
How much those payments are and how they’re determined are largely up to you. You can choose either a fixed rate (at 8.99%) or you can choose a variable rate (which today sits at 7.99%.) You can also choose anywhere from the minimum of a 5-year amortization period to the maximum of a 15-year amortization period. Now that you know what the payment types and periods are, let’s look at the good and the bad of this card.
For being a credit card, this one actually has a lot of positives going for it. Firstly, even with the higher-than-a-mortgage interest rates, they still sit considerably lower than what you’ll find on most of today’s plastic – which sits at around 20%, on average. Also, unlike your mortgage there are no prepayment penalties, you can make lump sum payments, you can change the amount you pay and how often you pay and, unlike most credit cards, there is no annual fee attached.
So what could be bad?
The only thing really bad about this card is the interest rate. You can get HELOCs much cheaper, only pay off the interest during those months that you’re short (although you should try to pay some of the principle every month,) and you have an indefinite amount of time to pay it off. So which is the better choice for consumers?
Those who have access to home equity and can use it to take out a second mortgage are still better off going that route as it will save them money in interest and it works as a revolving line of credit (something the MyProject card doesn’t do.) However, for those who aren’t homeowners or don’t have enough equity in their home to take out a second mortgage, this credit card could well be the best one on the market today.
