A rchive Date
[ 13-09-2000 ]
Category
[ International Relations ]
sub-Categoy
[ Canada ]
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[Slappin' the plastic less than fantastic
By ROY CLANCY -- Calgary Sun
September 13, 2000
It isn't merely a case of giving credit where credit is due anymore.
These days just about everyone gets credit.
The phrase "let's put it on the plastic" has become the battle cry of an overworked, hard-spending generation or two of consumers.
With nearly everyone packing around at least a couple of credit cards and offers for new cards arriving daily in the mail, it's not surprising the credit card companies are thrusting about for ingenious ways to expand their customer base.
One new card aimed at teens by Visa in the U.S. has consumer advocates seeing red ink.
The Visa "Buxx" card is actually a "reloadable payment card" designed to offer 13- to 17-year-olds a spending system Visa describes as "safer, but still convenient as cash."
Parents set a spending limit and prepay that amount into a special account, which they can monitor to see how much Junior is spending.
While some experts acknowledge that the card might help youngsters learn about saving, spending and credit, Frank Torres of the U.S. Consumer's Union warns the cards are just a device to get young people addicted to plastic.
"Visa and other credit card companies are not altruistic organizations," he argues.
I personally believe Torres is being a little too hard on the plastic-mongers. I'd be willing to bet a few Buxx they are ashamed of the stratospheric interest they charge and merely want to ensure our innocent teens are protected from the ravages of credit overload.
Besides, isn't everyone addicted to plastic these days?
With such a preponderance of credit cards around, it's hard to believe the little slip of plastic got its start just 50 years ago.
Well actually, the first credit card was paper when it was introduced in 1950 by a New York businessman who came up with the idea after he discovered he'd left his wallet at home when he went to pay the tab at a pricey eatery.
That first, landmark card was issued to 200 people.
The plastic version was introduced in 1959 by American Express to make it easier to process and less susceptible to fraud.
From a novelty for the affluent, the cards have grown into a tool that offers financial convenience for almost everyone these days.
There are cards that earn frequent flier points or donations to a favourite charity, cards that offer savings on cars, and cards that offer low "teaser" interest rates for the first few months.
With gold and platinum versions becoming so common they have lost their snob appeal, a spate of new cards were unveiled this summer which offer sky-high limits and a wealth of services -- all for an annual fee of $1,000.
Don't call them, they'll call you. Only the elite of earners qualify.
On a more pedestrian level, people now use them to pay for everything from gasoline to phone bills. They're everywhere. Even China introduced credit cards in 1980.
They've revolutionized the way we buy things and our attitude toward money and spending.
The cards mean "even the little guy can borrow," says Columbia university business prof Frederic Mishkin.
But not everything about plastic is fantastic. The cards have also been criticized for luring millions of undisciplined spenders into crushing debt and even bankruptcy.
While nearly half of credit card users pay off the balance every month, others use the cards to dig themselves deeper into the hole.
Aided by staggering tax rates, among other factors, we've evolved from a nation of savers to a land of spenders.
The Conference Board of Canada reports that personal savings have dropped to 2% from 10% earlier in the decade. Credit debt has risen from 17% of disposable income in 1983 to 29% last year.
Nationally, bankruptcies from January to July rose from 42,672 in 1999 to 43,998 this year.
Still, all is not completely dark on the horizon.
Economists concede that even though consumer debt has grown to dangerous levels, vigorous job growth and the buoyant economy are keeping many debt-burdened Canadians from going under.
Sadly, for some of those frantically treading water, any sudden change, such as a significant hike in interest rates or the loss of a job, could be all it takes to drag them beneath the waves.
It's too bad they don't make a credit card that floats.
Letters to the editor should be sent to callet@sunpub.com Clancy can be reached at 250-4235
 World Fact Book (CIA)]]
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