Credit Canada

Some experts will argue, some debt is bad, some debt is good. But I say debt, especially too much of it, is Enemy Number One. And never before in history have Canadians carried so much debt.

Total household debt in this country has broken the $1-trillion barrier. With our "I want it now" culture, fuelled by a hot real estate market, today Canadians families owe a whopping $1.1 trillion. A breakdown shows we owe $664 billion in mortgages, $50 billion on our credit cards, $194 billion in personal loans, which include popular lines of credit; plus other debt.
 
So, it comes as no surprise that a new survey by Credit Canada shows Canadians are feeling more in debt than ever before.
 
But what's worrisome is more than half of these families do not have a household budget and 80% don't know their credit score, which affects the cost of carrying their debt, the same survey points out.
 
Then, there's a report by the Financial Consumer Agency of Canada (FCAC) in Ottawa, that shows 85% of Canadians have a credit card, 58% have more than one card, yet 31% don't know the annual interest rate they're paying on the card they use the most.
 
And only 41% understood interest is charged on cash advances made on a credit card, even if they paid their account in full by the due date.
 
"Unfortunately, our findings suggest that a sizable segment of consumers lack important knowledge about credit cards, especially when it comes to interest rates and interest calculations," said Jim Callon, FCAC's acting director.
 
Laurie Campbell, executive director of Credit Canada, also voices concern about Canadians' lack of basic financial knowledge, and worries that 26% don't consider what impact rising interest rates will have on borrowing costs.
 
CREDIT CARDS

Credit cards, though, are considered bad debt, and it's no wonder.
Not only do they encourage frivolous spending -- but interest rates are obscene, when stacked against a cheap prime lending rate at 6.25%.
 
Retail cards charge 28.8%, while the annual interest rate on a standard credit card is 18.9%. So, if you have $5,000 on a retail card, you're paying $1,425 a year in interest, while on a standard credit card, $932.
 
Moving that debt to a low-rate card at, let's say 1.9%, will cut the interest to $94, meaning a savings of up to $1,332.
 
But be careful. Often these cheap introductory offers have a limit on the low rate, which shoots back up to lofty levels.

*Reproduced with permission - Sun Media Corp.