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Paying your debts – a moral dilemma

September 5, 2017

Sadly, mounting numbers of Canadian consumers are using debt to pay for debt.

There is very little doubt that lenders have become facilitators, banks now offer variety packs of credit cards (VISA ‘and’ Amex ‘and’ MasterCard – where they formerly only offered one credit card).  Couple these credit cards with various lines of credit and consumers can use one form of credit to make payments on other forms of credit.

But what does that do for you, how is it helpful?  If you are looking for a short-term solution as a stop-gap measure between jobs or other significant financial changes such solutions may be helpful.  But for the clear majority of debtors such practices just mean the perpetuation of debt and continued payment of interest and service charges.

There is the illusion of “good credit” – if you are paying your debts on a regular basis, albeit using one credit card to make payments on another, you will have a strong credit score.  So long as you keep making payments lenders will keep increasing your limits.

The real jeopardy is that the debt (credit) you have access to may not be sufficient to allow new purchases because that might tip you over your limits too quickly and lead to a cancellation of credit facilities.   Then the house of cards collapses, quite literally.

If you keep making monthly payments using other forms of debt is that the same as being able to pay your bills and manage your credit?  Is it morally correct to make payments on your debts by using other forms of debt?