A Nation Under Debt

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Zen...

How much do you owe? Honestly? Total of your credit card, line of credit etc?

See, one thing it took me some time to get used to in Canada was the free money. I’m not talking about the $52.76 the Canadian Revenue Agency would deposit in my account each semester as part of my GST refund (apparently, I was too poor to pay the government sales tax). Nope. I mean, I didn’t mind that of course. But I’m talking of the almost unlimited choice of credit cards and all the money you can borrow here in North America.

I came to Canada with just a French checking account ($3,000) and about $100 worth of Travelers’ Cheques. Five years later, I have a checking account and a saving account at Scotiabank, two credit cards from CIBC (a regular one and a student one I keep on forgetting to cancel) and I’m about to apply for a better Bank Of Montreal credit card (the air miles thing, you know). Oh, and let’s not forget about my Paypal account.

I should be ashamed of having money everywhere but apparently, I’m a small-time player. Or so said the last telemarketer who called to offer me a $10,000 Amex credit card. I gasped when I heard the figure. “But I don’t make that much money“, I naively admitted. “That’s why you should be interested in a higher limit credit card, ma’am. This is Canada“, he added, in his heavily Cantonese-accented English.

I said no. I said no to Amex, I said no to TD, I said no to a bunch of credit card companies that I didn’t know existed. I turn down great — not to mention unique — Sears card offer each time I buy a pair of socks (“but you could save 10% on today’s purchase!“). Canadian Tire wanted me to apply for their Options MasterCard last time I bought a tennis racket: “you have nothing to lose, there is no annual fee!“. I receive letters with pre-approved credit card, most of them enclosing a life-size paper credit card to show me what would my new accessory would look like: “Check out our new sunflowers design… or pick your own!“. I could even have gotten a Gold Card according to the last one I received. Oh, did I mention I make less than $25,000 a year?

Why would I need a credit card?“, I first asked myself. See, in France, we don’t have credit card. We have debit card with possibly an overdraft authorization, that’s it. Let’s say you have an account at the “Banque de Paris”. You will get a card with a Mastercard/ Visa logo to the name of the “Banque de Paris” (with a micro-chip, not a magnetic stripe!). The Mastercard will be linked to your checking or saving account and you can only withdraw the money you have. The funds are drawn from your account in real time — no bill at the end of the month. Most people have an “autorisation de découvert” (overdraft authorization) on which the bank charges interest. But there’s no way the bank will let you go overdrawn for as much as most of the North American credit card let you borrow money. In France, money is lent to rich people. In North America, the more you owe, the more companies lend you: “with a slightly higher interest M. Jones, but you could get a much better limit“, “no credit, bad credit, call us!“, “shift your debt on our much lower interest credit card“, “sell your soul to the devil“…

But in North America, you need to get a credit card to get a credit history. And how do you get a credit card? With a good credit history! This is known as the “catch 22” by most immigrants who start from zero. I was lucky: I was still a student when I applied for my first credit card and I was approved very easily since my credit limit was only $500. I was told the basic of credit card:

  • Ignore the “minimum payment due” and pay the credit card in full every month, the interest being around 20%
  • Don’t use store credit cards. They might be easier to get but they also have the highest interests
  • Don’t take cash advance out of credit cards. The rate for cash advances is much higher, and there is no grace period — you start paying interest right away.

The three evils credit bureaux (Equifax Canada, TransUnion Canada and Northern Credit Bureaus) must know everything about me by now. My passion for underwear from La Vie En Rose, the Virgin (nothing to do with underwear) cell phone that I recently bought, the places I live in, that I haven’t gotten a pay raise in two years… my willingness to repay a debt is assessed and calculated everyday.

Am I being way too anal for that country? After all, in North America, people are likely to answer the question “how are you?” by saying:

Oh, same old same old, kids both going to university, I maxed out my credit card to renovate the house, I took a second mortage to buy a small cottage and I used my line of credit to get a new car. But hey, we’re going to holidays in Florida this winter! We need a break from all the financial problems.

Hard to understand for a newbie to credit cards like me. But here are a few facts: in the USA, credit card debt is $915 billions, 640 millions credit cards are currently circulating and each person owns an average of four. And 14% of consumers own more than ten credit cards…

Who is to blame here? Credit cards companies sure are tricky and sneaky. Their interest rate is usually outrageous and you get charged for everything, from late payments to exceeding your credit limit, payment processing fee to cash advance, membership fees etc. The so-called “universal default” is another controversy. It basically allows creditors to check cardholders’ credit portfolios to view trade, thus allowing the institution to decrease the credit limit or increase rates on cardholders who may be late with another credit card issuer. Thus being late on one credit card can affect all your credit cards.

But we need to be responsible as well. Easy for me to say since I’m relatively new in the game, I know. But to me, credit cards are a way to build a credit history and a convenient way to buy stuffs on the web. You can occasionally collect points and be rewarded. They are not to buy something I can’t afford in the first place. This is not your money.

Credit cards are part of North America, a quick way to buy a share of the American dream, to fall for the latest craze, to feel rich once.

Buy now, live now and pay later… a North American addiction.

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About Author

French woman in English Canada. World citizen, new mom, traveler, translator, writer and photographer. Looking for comrades to start a new revolution.

31 Comments

  1. I owe 6k in cc, and 58k in student loans. As soon as i pay my last cc bill, i’m going to never use them again…a hard stance, but I’m going to do it! I hope.

    sir jorges last great read…Weight of the World

  2. Froggywoogie on

    No credit cards in France? Hmmm want mines? I don’t use them but they have practically been put inside my hands, one of the companies even insisting my income was higher than what it really is. And no, I didn’t mean my debit cards

  3. It is our patriotic duty here in America to spend money. At least, that’s what the country was told after WWII so that we could keep the economy on an upswing. Of course, the easy availability of credit isn’t exactly helping the nation too much now.

  4. You are so right and many Canadians and Americans live WAY beyond their means. The problem is that all this credit is available fresh out of high school and most people aren’t taught how to be responsible with their money, because their parents usually aren’t.

    When I started collage I started getting all these applications for credit cards. WHO at 18 years old is going to say no to ‘free’ credit? Because at that age, that is how you see it.

    Add on top of that the massive student loans they allow you… eish.

    I came to the Netherlands with my Canadian credit in shambles. Mostly do to the inflexibility of the government in regards to my student loan. Now, I am completely in the red.

    Here in the Netherlands we live totally different, and that’s all thanks to my husband’s European upbringing rubbing off on me. It’s simple, we don’t spend money we don’t have. We DO have a credit card, simply because with technology today it’s pretty much impossible not to. It makes ordering from Amazon and stuff like that much easier. But we don’t spend more than we are able to pay off in full each month.

    It’s a lot more comforting and a lot less scary to live this way. When I think of what I’d be going through in Canada right now in regards to my credit, I cringe.

  5. Yo Zhu, sadly alot of people ‘abuse’ the credit cards being issued to them by buying on impulse and accumulating debts along the way. What a shame!! I have couple of friends who were declared bankrupt and still struggles.

    I have couple of credit cards too but I usually use Citibank 😀 No to Amex too coz they charge to high an annual fee.

  6. It is scary. Over here we have a credit card, but we pay it off every month. The only thing we owe is the mortgage on the house, since, well hey, we just didn’t have enough loose change lying around to buy the house. I hope we never end up with such an easy credit system over here.

    Theresas last great read…I know your nostrils by heart…

  7. Hi Zhu! You know the problems you describe in Canada sound similar to the easy credit in the UK. Although the “credit crunch” is stemming some of the worst excesses. But even in France, there are more and more ways to get loans, you’re no longer limited to just your bank. You can get “store” cards with most of the big name retailers, and companies like Cetelem and Sofinco are hard-selling expensive credit to the most vulnerable borrowers. I don’t know where they get your details, but we get pre-approved loan applications every month just about! “Simply tick the box for the amount you want to borrow, pre-approved up to €12,000!” And the interest rate is printed in tiny tiny typeface.
    Alas, credit and loans companies prey on the people who are least able to afford credit and most likely to need a quick cash boost. But I suppose money-lending isn’t exactly a new invention.
    Bisous from sunny Ardèche !

    Lis of the Norths last great read…Relax, take it easy

  8. I never a credit care one before the start of my long term relationship with my wife. We always pay ours off, but they are often more convenient to use than debit cards. My problem is student loans, which I don’t think is a problem in France.

    In the U.S. (and Canada), you borrow your future and hope that something bad never happens. Unfortunately, something bad usually happens. At least in Canada, we don’t have to worry about using credit cards to pay medical bills!

    johnadas last great read…WHO CARES ABOUT THE HOCKEY NIGHT THEME SONG – Apparently Everyone

  9. Hi Zhu,

    The consumerist societies like America have given rise to the aggressiveness of credit card companies. And wherever these companies operate, you can be certain that the place has been “westernized” or caters to western tourists and populations.

    The concept is to give you all the leeway to go on consuming and purchasing things you can actually do without, or do with less. They ride on the “good life, worry free” shopping and travel spending so that they can corner all the money you have today, and all the money you can make in the future. It is a way of mortgaging the future for the present. This also effectively eliminates savings.

    This is one reason why the credit crisis in America continues to bleed their financial institutions. Most of those who lost their homes which are carried by the banks’ portfolios as losses are also credit card holders. Their cards are all maxed out and their present predicament with salary cuts, man hour reductions, and outright terminations because of a recession, coupled with rising fuel and food prices – exacerbated by a decline in the value of the dollar – will cause them to default on their card payments. These are the consumer portfolios of the banks who have already suffered from the sub-prime crisis.

    When you mortgage the future and it comes with bad news, there is nothing to draw from to survive, because there are no savings. In contrast, the Japanese Yen is stable because the Japanese, like most Asians, scrimp and save to buy what they want or need, not get the items on credit. With lots of cash in banks, inflation is also regulated. However, the younger generation of Japanese and other Asians are more westernized, and there lies the danger.

    The key really is what you have outlined as the 3 rules for using cards. Spend only what you can afford without jeopardizing the amount you should put into savings. When the savings are large enough, start investing, first in safe investment instruments. The idea is to work for the money and save a portion, then live on the balance no matter what. Next, when the savings are adequate, let the money work for you. Don’t spend it all and its future earnings on credit card purchases, these are money traps. 🙂 –Durano, done!

    durano lawayans last great read…Canada’s Confession and Challenge

  10. I owe a few thousand. but i’ve totally defaulted on all my creditors… since I discovered there’s almost nothing they seem able to do in law to get money out of it (bc I don’t have it) I simply stopped stressing about it. any thoughts of “shame” for being in bad debt have long since evaporated!

    Gledwoods last great read…Finally: Sleep

  11. Hey Zhu

    I echo your opinions exactly as I am a newcomer to Canada too. I see so many of my friends grumbling over the thousands of dollars they owe, yet go on expensive holidays and shop at overpriced stores. The Indian upbringing in me compels me to count every penny, and I’d go to Tim Hortons only because I save a dollar off Starbucks… lol

    It was indeed a fun to read this!

  12. SilverNeurotic on

    I owe less than $2,000 from a student loan. I do not have a credit card, I have my debit card and it works for me. I’m not a big spender for the most part, and if I do make a big purchase (such as my car (used) or my computer I just bought, I have paid for it outright.

    SilverNeurotics last great read…I got it…

  13. Interesting post. Your post usually have a serious and informative tone to them. I myself do not have a credit card, just debit for my purchases which require some sort of a card. I do not have any type of loan at the moment, and I budget my money wisely (I hope), just living within my means.

    Linguist-in-Waitings last great read…Reading, Reviewing, Running

  14. actually, the system of capitalism has put the whole world under debt. we’re living on a leveraged world, its all about what your potential to make is, not about how much you hold. people on mortgages, credit cards, loans, and so on. and not just the people, i mean, we’re peanuts in comparison to the huge multi-billion dollar companies and the facilities they take out. it’s scary.

    thing is, put to the right use, debt can do a lot of financial good, it can multiply the power of whatever money you had originally. the problem is the opposite side, if you do damage to yourself without the debt, whatever damage is going to be just that, multiplied.

    ammaros last great read…Justified Stealing?

  15. It’s funny… I like having a credit card for the sake of having a credit card lol.. Just convenience and I always pay everything back within days… Maybe it’s just me 😛

    Fengs last great read…An Amusing Thought

  16. It really is terrible how much many people live beyond their means here, but it’s not something easy to prevent, even though they are destroying our economy too, while we’re being responsible. I’ve managed to help at least one person get out of crippling credit card debt, but most people aren’t really interested in doing it.

    I have an ING savings account, and a PC Financial account for chequing because there are no fees. If you’d like a referral code for an ING savings account, we’d each get $13 when you make your initial deposit. And I don’t recommend them, just for the free bonus money, their interest rates and service aren’t beat by the Big 5 banks in Canada.

  17. @Aaron Wakling – You’re very welcome, thanks for visiting!

    @sir jorge – Student loans are a big burden on people… In Europe, university is almost free, it helps a lot. Good luck with the money!

    @Froggywoogie – Seriously, I’ve never seen any “proper” credit card in France, except for having a Mastercard/ Visa logo on most of the debit card. I didn’t even know they were available. Wanna send me one? 😉

    @Kirsten – I like the way you put it… yes, in a way, Americans were brainwashed to be patriotic and spend! Very true.

    @Breigh – Thanks for sharing your story! To be honest, have I grown up in Canada, I’d probably have a student loan debt and other as well. As you said, young adults aren’t the best budget manager usually… it’s hard to see the future and realize you may carry the debt well into adulthood. There should be credit card classes at uni!

    @shionge – I think people really consider it as “free money”. And there come the interests…

    @Theresa – Having a mortgage is normal to me. What I find scary is charging your holidays or your fashion purchases on your credit and not paying it off… maxing out plastic is like a national sport here.

    @Lis of the North – I know for Sofinco, I worked for them as a temp for a couple of months when I was a teen. I was actually evaluating applications… yes, a 19 years old without training can do that apparently. Not my best job experience, left a bad taste in my mouth.

    @johnada – You’re right, most Europeans don’t have student loans debt because uni. is so cheap. A few of my friends do because they still had to borrow money for living expenses though, but this is rare in France. I hate seeing people starting off their life with a debt… if you studied medecine or similar field where studies are long but usually pay off relatively quickly, it’s still okay, but for most of us it’s tough.

    @durano lawayan – I understand the mindset you highlighted, and this is very true. But since I didn’t grow up here, I kept my old European “buy things you can afford or pay off quickly” state of mind.

    @Gledwood – It’s one way to do it! I don’t think these companies can do much if you don’t have assets anyway. However, it could be tough if you need a mortgage etc. in the future… Not judging, just thinking.

    @Priyank – Crazy isn’t it? I will never forget the first time I saw a Canadian wallet and the stack of plastic cards in it! 😆

    @SilverNeurotic – Are you sure you’re American? 😆 Seriously, this is great for you. Low debt, not a big spender… credit cards companies must hate you!

    @Linguist-in-Waiting – I like my credit card because it’s convenient but I pay it off every month and frankly, it’s always a small amount. Living within your means… that’s the way. Got your email BTW, will reply tomorrow!

    @Rudy – I know it’s sometimes hard to make it at the end of the months, I assume this is especially true with kids!

    @ammaro – Borrowing money makes sense to me. Great system to buy a house, a car etc. What is wrong is pushing people to consume always more and what they buy… Good analysis.

    @Feng – Nope, not just you. I’m the same!

    @Saskboy – I’ll have a look into ING and get back to you if I’m interested. I heard about them before and I’m curious. How do you find PC by the way? Haven’t tried either.

  18. I have amassed 3 trillion of debt purchasing weapons of peace to invade unruly warmongers. I am going to start by invading the US!

  19. actually, if you have the self discipline you should get the highest limit possible on your credit cards.

    thats because having a high utilization on the card drops your credit score. example, you have a $500 card and you spend $400 a month. Even if you pay it off every month, your utilization is 80% which lowers your credit score.

    if your limit was $4000 then your utilization is only 10% which boosts your credit score, thus lowering the interest rate!

    Living Off Dividends & Passive Incomes last great read…How To Start Multiple Businesses

  20. Hi Zhu,

    I just graduated from a Canadian University in the Province of New Brunswick, I too have a credit card for the purposes you mentioned. And I like your footnote, as a person who hails from Malaysia, I too complain about the exceedingly bitter Canadian winter.

    Best Regards,
    Suresh

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