519-646-2222Credit Cards – pros and cons
Credit Cards, whether you knew it or not, have been around in a variety of forms for over a hundred years. Credit cards started out as basically convenience cards, mostly for wealthy patrons and businesspeople on the move. By the late 1970s they started to really gain traction with everyday consumers.
Credit cards have been used by Banks as well as other companies to exploit consumers by, effectively, driving up the price of goods and providing an incredible markup on interest charges for lenders who are not (also) selling goods or services.
Pros.
The pros are far fewer than the cons. Having a credit card available during an unplanned emergency car repair or unexpected travel cost can be a lifesaver. Credit cards deliver a measure of security in allowing the user to know than even if they have no money in their account, they can still cover a variety of incidental costs.
Credit cards can, and often are, used as a gateway to improving credit scores to pave the way for mortgage or car loan approvals at reasonable rates. Credit cards eliminate the need to carry large amounts of cash and bring with them several security measures.
The use of credit cards is ubiquitous in our society, and they are accepted as payment for a variety of goods and services around the world. Credit cards allow you defer payments for a period of time allowing you smooth out the impact of large purchases or payments.
Cons.
Of course, there are far more cons than there are pros. In Canada banks have issued about four (4) credit cards for every single person who works. Canadians charge about three times more money on bank issued credit cards each year than actually exists. When you use credit cards you increase the cost of goods and services purchased by an average of 30%.
Having too many charges on credit cards may elevate your credit score but block access to other forms of credit such as mortgages. The average charge on a credit card is much lower in 2023 than it was in 1977 – this is because the costs of goods and services has increased relative to income and credit cards are being used for smaller purchases.
Very few people ever pay their credit cards off in full each month, in spite of banks suggesting that 70% do, this is because the billing date and the payment date are about two weeks apart, so by the time last month’s bill is paid you are probably half a month deep in new charges.
Minimum monthly payments on credit cards are at incredibly exploitative lows and should be criminalized. An 84 year old bankrupt client produced a CIBC credit card statement showing that if he “chose” to make minimum monthly payments it would take 420 years to pay of his balance.
We have also seen a credit card statement with charges of nearly $10,000 requesting a minimum monthly payment requirement of $10. Credit card companies are operating a massive Ponzi scheme that requires they constantly add new customers and encourage more charges. Hint, Ponzi was jailed for “mail fraud”.
Credit card issuers have access to the same or nearly the same borrowing facilities as chartered banks, while the overnight rate (the rate at which banks and major lenders could borrow from central banks) was a mere 0.25% credit card interest rates were as high as 32% and bank issued cards averaged higher than 17% a markup of nearly 7,000% on their borrowing costs.
Credit card issuers encourage their clients to increase credit limits in order to avoid default, they know that consumers are using credit cards to make minimum monthly payments on other credit cards and lines of credit in a circular pattern. Bank tellers are bonused to push credit cards and lines of credit on unsuspecting clients, even when the teller can see the person’s bank account details showing they are on a small fixed income.