When I started out in life, like everyone else, I thought debt was a way of life so I got a credit card, and overdraft protection, and a car loan, and started to live and spend like everyone else. The problem was that as an entrepreneur, I don’t earn like everyone else. My income was and still is sporadic so I started to use my credit cards to bridge the gaps, before long I was over $40,000 in debt and behind on nearly every bill. One day late in October, just before it got really cold out the gas company came and shut off the spigot. In order to turn the heat back on I had to pay them all of the arrears I had run up and put down a new deposit. Needless to say I didn’t have the money so I ended up borrowing nearly $1000 from a friend that I couldn’t pay back for almost a year.
Today, over 15 years later, I have zero debt with no intention of ever borrowing money again, (EV-ER!) except maybe for a piece of good undervalued real-estate.
All this to say that when I read this story in the Financial Post a few months back, it got my back up.
Everyone knows that the primary business of banks is to lend money and charge service fees. So the fact that it is illegal in this country to charge extra to customers who pay for goods on credit shouldn’t surprise anyone. Banks don’t want you to use cash because they don’t make anything on it.
What’s upsetting about this story is the underlying evil here that because the banks charge the merchants such high fees to accept the cards, everything in the store is marked up. Even if you don’t use a credit card you’re still paying a price that assumes you did. That’s just wrong.
Furthermore, it’s illegal in this country for the government to apply a hidden tax. That’s why sales taxes like the HST/GST are added to your bill as a separate line item and why restaurants have to give you the option of not paying a gratuity. By hiding the merchant service charge banks are in effect applying a hidden tax to the cost of everything sold in a store that accepts their cards, regardless of the payment method chosen. It’s high time this practise was stopped. In a country where the average household spends 162% of its income in a given year, unbundling the merchant fee on credit cards would go a long way to helping consumers rethink the way they pay for things.
True it might hurt the economy in the short term but continuing to spend money on things we can’t afford is simply unsustainable. Sooner or later consumer debt is going to hurt the economy anyway, better to do it intentionally, with a controlled strategy to keep the economy moving than to let it happen on its own and bring about a crisis, a-la the US Housing meltdown of 2008.