My daughter will be out trick-or-treating for the first time tonight and was really looking forward to be going out dressed as a duck. Sadly our hunt for a duck costume has ended and she’ll be trolling the street for candy in a puppy costume instead. She was confident there would be plenty at the ‘Duck Costume Store’. We never found the store, but I promised her if she found one, I’d buy one for her. Perhaps someone next year will fill the obvious gap in the market. Hello?!
What are you dressing up as? Dressing up as someone else is fun and a big part of Halloween festivities. But using credit to look like someone else? Not so much! The truth is, many are living a lifestyle they simply can’t afford, masking the real problems.
high-interest credit cards have become the go-to method of payment (as reward credit cards have become increasingly popular), and
rock-bottom mortgage rates and rising home prices have helped drive demand for home equity lines of credit (HELOC)
At the same time, that average balance of personal debt hasn’t changed all that much year-over-year, and I think part of it has to do with people extending their debts. Credit card balance transfers that were supposed to be used to lower interest rates, so that debt can be paid off quicker, are often being used to avoid the debt for a little longer. Yes, 0% introductory offers are great, but most are just that – introductory. And I’m starting to hear more and more tapping into their home ‘equity’ to pay off their credit cards. Which is not a bad idea, in principle. But are we getting better at managing our debts, or just better at moving money around? And even worse, hiding them from our loved ones?
Here are some more startling and haunting statistics:
Spooky credit facts and figures
71.6 million – the number of personal Canadian credit cards in circulation as of 2012, reflecting a 22.8% growth in the past 5 years. That’s approximately two credit cards for every man, woman and child in Canada! In 2012, there were approximately 487.9 million personal credit cards in circulation in the U.S.. (Source: Euromonitor International, Credit Card Transactions in Canada and US, January 2013). Talk about convenience!
15 years, 5 months is the approximate amount of time it would take, to pay off a $3,637 credit card balance at the average credit card rate of 18.9%, if you only make the minimum payments (3%). And it will cost more than $3,681.73 just in interest – yip, more than double the principal amount.
$165.6 billion was the 2012 total outstanding balance of all HELOC’s in Canada in 2012, comprising more than 10% of overall consumer debt (mortgage and non-mortgage). Last year, HELOC’s became the second biggest source of Canadian household debt. (Source: Euromonitor International, Consumer Lending in Canada, January 2013). ‘Secured’ credit doesn’t mean safe.
Advice for the living debt
Those are some pretty scary numbers. But if there’s one lesson to learn here, it’s that it’s important that we start to tackle our debt problems and stop hiding from them and stop hiding them from others.
Now that Halloween is upon us, we’re just heading into the big holiday stretch, which for many, can be an expensive time of year. So what better time than now, to review your own financial situation and clean up any financial skeletons in your closet.
Okay I know, I know. Enough with the cheese! Now I can finally take off this silly eyepatch. Writing with one eye is not as easy as it looks :).