Credit “Caution Debt Ahead”

April 11, 2019

That’s right, be careful, think twice and look ahead at your own future when you use credit.  Politicians, bank regulators and bankers are not looking out for your interests.  Credit always sounds so much nicer than debt, and that’s why they are pushed as “Credit Cards” not “Debt Cards”.  Imagine the banks trying to sell you “debt” that would require a level of honesty that is rarely found in banking institutions.

Even bank tellers are paid to sell the only “product” banks have, debt!  Bank tellers get bonuses for upselling you on mortgages, overdrafts, credit cards, lines of credit and car loans.  Tellers may not write the deals, but they do try to get you into see someone who will.  A typical bank credit card requires minimum monthly payments that any rational person would think should be illegal, but customers are still glad they can access the debt to put groceries on the table.

If you think Venezuela is in trouble just wait, Venezuelans only owe billions in consumer credit while Canadians owe trillions and the population of each country is quite similar.  What do the payments on $2 trillion CDN look like and how long would it take to pay off?  Don’t worry, I have done the math so you don’t need to – within the next five years Canadians can expect to owe the banks at least $2.7 trillion and growing.  By the way, your monthly debt payments, if the distribution of debt were even across all income earners, would be about $1,520.

The terms Canadian banks use for repayment are purposely designed to make it impossible to ever repay and the banks regulators (basically other bankers) as well as politicians are willfully blind to the long term consequences on the Canadian economy.  The reason I believe that monthly payment terms should be illegal is that in many cases the terms extend over many lifetimes, it is usurious to leave people in a perpetual state of indebtedness.

Few people realize the implications of making long term payments on debt and most are grateful that the minimum monthly payment is so small they can cash-flow it without having go bankrupt.  At the very least such payment schemes demonstrate the lack of ethics in the banking system, from the bankers, through to their regulators and the politicians who sign off on policy. 

What can the government and regulators to relieve the situation?  It really is simple, there are two things, first increase interest on mortgages while decreasing interest on lines of credit, credit cards and loans, and second shorten all repayment terms to a maximum of ten years.