Your very own credit crunch


Canadians who can only afford the minimum monthly payments on their credit cards could soon face their own personal credit crunch. Card companies are raising their monthly minimums as they face pressure from Ottawa to help reduce soaring personal debt levels. As of August, Canada’s biggest issuer of MasterCards, MBNA Canada Bank, will change the way it calculates minimum monthly payments, effectively raising them across the board. The idea is to prevent cardholders from falling into a cycle of debt where they only pay off interest and fees each month, leaving the principal virtually untouched. “We really think it’s a prudent thing to do for our customers,” says MBNA spokeswoman Cathy Velazquez.

But it’s not like the industry, with its 20 per cent interest rates, has suddenly decided to look out for our best interests. New rules coming this fall require card issuers to inform customers exactly how long it will take to pay off their balances with only minimum payments. Card issuers also have an incentive to forgo earning more interest if it helps ward off personal bankruptcies. “The defaults have been very high,” says Laurie Campbell, the executive director of Credit Canada. “There’s a recognition it could be a house of cards.”

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Your very own credit crunch

  1. Our economy is certainly a house of cards. Credit cards.

  2. Certainly right Justin. But it all depends upon the users. Some cards offer fringe benefits such as the cash back card or best travel rewards in Canada. It' s all about proper financial management at the end of the day.

  3. This is just another way of getting more money from our pockets ,to them. They are always like crying for more money,they are robbing us blind, just like the romans did in the old days.

  4. I get quite tired of the bashing aimed at credit card companies. They are not monopolies, you are not forced to use a credit card (well, not always anyway) and there's nothing stopping you from paying off your balance on the due date. Only the most financially ignorant amongst us is unaware of the high interest rates and onerous conditions associated with these cards. If you don't want to pay those rates, etc then either pay off the balance in full or just don't use the card. It *really* is that simple.