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Surviving credit card debt
When your grandparents were growing up consumers did not have credit cards. People typically paid cash for goods and services. Today it is hard to live without a credit card. Try to rent a car or purchase an item online without one. In 2006 there were more than 61 million credit cards in circulation in Canada. That works out to be about five credit cards per Canadian household. Close to 90 percent of individuals filing for personal bankruptcy today in Canada owe thousands of dollars on one or more credit cards.
Why are credit cards so dangerous for consumers?
There are several reasons
- credit cards encourage impulse purchases
- credit cards are an invitation for people to borrow money to buy goods and services
- credit cards encourage people to make purchases they cannot afford
- consumers with outstanding credit card balances carry expensive interest charges
- many consumers do not appreciate how costly it can be carrying significant balances and making minimum monthly payments
Today we live in a society where consumers are bombarded by commercial messages encouraging them to spend money on goods and services. In a moment of weakness a person might make a credit card purchase that they do not need, do not really want, or cannot afford. As well, a significant and growing number of Canadians are using credit cards to buy basic necessities.
Credit card companies encourage people to live beyond their means
Credit card debt was not a major issue for consumers 10 years ago. An individual might have one card with a $500 or $1000 limit. Since then major competition amongst financial institutions took place to extend an ocean of credit to Canadian consumers through credit cards. This had a number of consequences. Financial institutions began offering credit cards to individuals with less ability to pay and creditworthiness: teenagers, students, low-income earners, and people living on social assistance. In addition, credit card limits for individuals were significantly increased.
About half of Canadian cardholders pay off their credit card balances each month and therefore they do not pay any interest on their purchases. This means that half of Canadians do pay interest and late fees on their purchases. A significant amount of credit card interest and late fees earned by credit card issuers comes from those least able to afford it. Over the past 10 years credit card companies have taken advantage of the young and lower income individuals.
Today credit card companies may increase a cardholder’s credit limit without a cardholder even requesting the increase. A cardholder who originally could handle a credit card with a low credit limit might find himself in growing financial trouble because a credit card issuer has been increasing his credit limit. Many people have difficulty refusing an increase in their credit card limit. For those 50% of Canadian cardholders who do not pay off their credit card balances each month an increase in their credit card limit can easily result in them spiraling deeper and deeper into debt.
Credit card issuers may earn tens, if not hundreds, of millions of dollars a year in profits based on fees charged to merchants and interest payments and late fees charged to cardholders carrying a balance. Credit card issuers are only too happy to send you credit card offers with pre-approved limits. They are only too happy to increase your credit limit without asking you. They are only too happy to encourage you to make small monthly payments to maximize the amount of interest you pay. But if you subsequently have problems making payments because of divorce, illness, or loss of a job they will not hesitate to place your account with a collection agency.
Mark Silverthorn can assist you with your credit card debt
Based on his 12 years of experience as a former collection lawyer and collection industry insider Mark Silverthorn should be able to be of some assistance to you with your credit card debt. You may want to speak to Mark Silverthorn. He can inform you in what circumstances you may be able to avoid paying a credit card debt. He can also provide you with advice about how to settle a credit card debt on favourable terms. You may decide that you want to hire our firm on a contingency basis to attempt to negotiate a favourable settlement on your behalf on your outstanding credit card debt.
You may also want to learn more about debt avoidance and debt elimination by reading Mark Silverthorn’s e-book titled
A How-to Guide for Dealing with Collection Agencies in Canada .