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.

Related arti­cles:

1. How to Avoid… Bank­ing Scams
2. How To Bank in Canada (4÷10)
3. 10 Ways to Not Become Poor in Canada
4. I Love Moo
5. How to Avoid… Iden­tity Theft