Credit Cards

As impossible as it seems, I can remember a time when credit cards were not the norm. I can also remember living on a street with a black smith-( I lived in the Junction area of Toronto at the time.) Milk was delivered by horses and we had an ice box for our fridge. I loved the summer when the ice truck came and we would all try to grab a chunk of ice from the truck to eat and relive our thirst and the heat.

One of my first full-time jobs was working at a major bank for Chargex. This was before the cards became VISA. Most people did not have cards and certainly they were not as common as they are today with 64 million credit cards in Canada for a population of 31 million. Stores had cards and some stores had lay-a-way plans. What happened to that practice? You would pick an item and have it layed away in the store. You would then make regular payments on the item and when you paid it off it was yours. Certainly, made people more aware of the cost of purchasing things. Credit cards which people even use for groceries in some cases- so that they can collect points for travel or pay for restaurant meals were not the ubiquitous sources of funds and purchasing power they are today.

This is interesting: Banks did not get involved in credit cards in a big way until the 1960's when the 6% (interest rate) ceiling which had existed for 150 years was removed. "that really got the banks going... All of a sudden their opposition to credit cards changed." It certainly did! What is the interest rate on unpaid credit card debt? It is certainly in the double digits.

Merchants accepting credit cards has risen 5 times in the past 30 years to almost 1.2 million. Some merchants will not accept credit cards because they must pay a fee for the opportunity to offer this service. This means when you use your credit card that a percentage goes to the credit card company. Interest on the unpaid is paid to the credit card company and most people do not pay off their cards each month.

Canadians do not use credit cards as freely as Americans which may help us personally during this financial crisis but will not stop the meltdown caused by the greed of some financial companies and policies of the American government which allowed the Freddy Macs and Fannie Maes to loan mortgage money to people who were not really in a position to sustain the debt that they were incurring. Other financial institutions compounded the problem with other questionable practices.

Sorting out what caused this situation and how to solve it will cause many thinkers to pause and consider why, how and what next.