Sorry to intrude on your post-summer reveries, but there’s another credit grenade being rolled under your chair.
Much closer to home, however, than the one inciting civil disobedience from all those money-for-jam freeloaders in distant lands like Greece.
This one is right in your pocket.
The financial burden of convenience that retailers now bear for their clientele’s credit-card use could be headed consumers’ way. And that, my friends, is when the real credit crud will hit the fan.
The nuts and bolts of the credit-card contretemps now rattling floorboards in retail outlets across the land are chronicled in Business in Vancouver’s recent Full Disclosure feature (“Credit card bill battle on” – issue 1143; September 20-26).
In it, reporter Richard Chu documents local merchants’ frustration over the rising costs of accepting credit cards payment from their customers. Those costs include interchange fees, transaction charges and other sleight-of-hand levies to pay for credit networks and to cover marketing and other costs banks ring up when they issue credit cards.
Not a bad deal for your friendly neighbourhood bank manager. Ditto for the credit-card-armed public either.
Less great, however, for retailers.
Because most of the card fees are calculated as percentages of sales transactions and because they vary depending on which of the roughly 200 card types available in Canada a customer uses, merchants are, at best, playing pin the tail on the donkey when it comes to estimating what those costs might be each month. That, as merchants point out, is hard on their long-term survival rates.
The Competition Bureau therefore wants the Competition Tribunal to force the two main credit network providers, Visa and MasterCard, to allow merchants to:
•hit credit-card users with a point-of-sale surcharge; and
•decline to carry cards that have higher interchange fees.
While consumers on the West Coast are notoriously averse to paying additional charges at checkout counters, many of the card users among them have only a vague idea of what real money is and how much they might be racking up on plastic each month.
Swiping a card and scrawling a signature is a deceptively painless way to acquire product and a seductive way to become mired in debt.
Canadians might, as a whole, be better off than their American cousins, but they’re far from out of the woods when it comes to solvency.
For example, a recent ING Direct report showed that a third of Canadians say they’re not even close to achieving their 2011 personal financial goals. And while TransUnion’s recently released quarterly analysis of Canadian credit trends found that the average consumer’s debt (excluding mortgages) continued to stabilize in 2011’s second quarter, total consumer debt for the first six months of the year remains 3% higher compared with last year, and Canadian lines of credit increased 5.4% year over year and 2.8% quarter over quarter.
Therefore the other shoe set to drop here is down at the consumer end of the credit food chain: spending and debt control. Accountability for both is as in short supply as genuine wealth creation. Steps to reverse that shortage will help address some of the economic issues raised above.
Being charged a premium to indulge that next impulse to exploit credit card convenience would be a good start. •
