Credit Card Debt: Living in Canada with Credit Card debt?
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Suffering From High Credit Card Debts?
Credit card debt is an example of unsecured consumer debt, accessed through credit cards.
The wealth of Canadian families increased substantially from 1999 to 2009, but they were carrying a much higher debt load as a result of growing demand for mortgages and consumer credit, according to new results from the Survey of Financial Security.
Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.
The results of not paying this debt on time are that the company will charge a late payment penalty (generally in the US from $10 to $40) and report the late payment to credit rating agencies. Being late on a payment is sometimes referred to as being in "default". The late payment penalty itself increases the amount of debt the consumer has.
When a consumer has been late on a payment, it is possible that other creditors, even creditors the consumer was not late in paying, may increase the interest rates the consumer is paying. This practice is called universal default.
Canadian Credit card debt statistics
United States (July 2008) $962 billion
United Kingdom (March 2009) £64.7 billion
Australia (2007) $41 billion (AUD)
Credit card debt is said to be higher in industrialized countries. The average U.S. college graduate begins his or her post-college days with more than $2,000 in credit card debt. The median credit card debt in America is $3,000 and number of cards held is two
Canadian household debt swells to $1.3 trillion in 2009!
Canadians are increasingly relying on credit cards and credit lines to finance day-to-day expenditures, and the total national household debt in Canada has reached an all-time high of $1.3 trillion, according to a report released Tuesday.
The report, authored by the Certified General Accountants Association of Canada (CGA-Canada), bases its findings on a national survey and other economic data.
The survey found that 42 per cent of respondents said their personal debt was rising in the past three years, and 21 per cent said they couldn't manage their debt.
Nevertheless, the report suggests that survey respondents were optimistic in their attitudes toward debt. Seventy-nine per cent reported that they can either manage their current debt levels well or take on more debt.
Some 58 per cent of respondents said that day-to-day living expenses are the main cause for the increasing debt. The same survey conducted in 2007 found that 52 per cent singled out everyday expenditures as the principal cause for rising debt.
Using data from Statistics Canada, the authors found that in 2008, debt made up 19 per cent of Canadian assets on average, and that debt accounted for 23.7 per cent of net worth. The researchers said both numbers were up compared to their averages between 2000 and 2006, when they stood at 15.4 per cent and 18.5 per cent respectively.
The survey interviewed 2,014 people and had a margin of error of 2.2 per cent, 19 times out of 20.
Relieving Canandian credit card debt
Account holders can request a reduction in their annual percentage rate (APR). A survey conducted by the U.S. Public Interest Research Group in March 2002 found that among its fifty participants, including people of all credit backgrounds, who contacted their credit card issuers, 56 percent received a lower APR. On average the percentage went from 16 percent to 10.47 percent
Bankruptcy concerns with respect to Credit Cards
Sometimes the late fees, high annual percentage rates (APRs), and universal default overcome consumers who frequently do not pay off their debt, and the customer declares bankruptcy. If a customer files for bankruptcy, the credit card companies are required to forgive all or much of the debt, unless such discharge of debt is successfully challenged by one or more creditors, or blocked by a bankruptcy judge on legal grounds irrespective of creditors' challenges.
Because forgiveness of debt reduces likelihood of profit and continued survival, the companies are generally willing to offer another deal to the consumers in danger of bankruptcy. This deal consists of reduced APRs, removal of past late fees and penalty charges, and reaging the accounts so that the credit agencies see them as late accounts.