2023-12-28 05:00:00
There are approximately 75 million active credit cards in Canada. Many have interest rates ranging from 19% to 30%.
Even if it is presented to you as annual, the calculation of interest on your balance is daily. In other words, you pay interest on interest. If you pay your balance in full, everything is fine. But who does it?
The majority of citizens, particularly in recent years ravaged by COVID, are barely making ends meet. Credit becomes the only option and if you are unfortunate enough to fall behind on your minimum, you will see your interest rate increase to 28% or 30% for one year. This is their famous penalty rate.
In Quebec, unlike other provinces, the minimum monthly payment for a credit card includes interest accrued during the month and 4%, soon 5%, of the balance. The goal is to force Quebecers to pay more quickly and therefore pay less interest.
Except that not everyone has the same ability to pay and many Quebecers find themselves with usurious interest rates as a penalty.
The story does not end there. Just as you are about to drown, these banks will offer you a credit boost. It’s so easy to say yes with just one click. The noose is tightening. They will continue to lure you with low interest or 0% balance transfers for 6 months which will convert to 20%.
At the end of the day, you lose out all the way. We are well-producing cash cows and above all chained by the inaction of governments in the face of banks.
What are governments doing?
There is a Regulation on Commercial Credit Practices which establishes rules regarding over-limit fees, the distribution of payments, etc., but nothing on interest rates. And even less on these famous “usurious” penalty rates. We only tell you to be careful and pay your minimums well.
In fact, this regulation is more a validation of the power of the banks than a real protection of citizens.
However, in the Criminal Code, there is a provision on the criminal rate.
A criminal rate of 30%?
You should know that the criminal or usurious interest rate was established at 60% in 1980 while the Bank of Canada’s current rate was 21%. This rate has never been updated.
At that time, the difference between Bank of Canada and criminal rates was 39%. Which is no longer the case. Today, the Bank of Canada rate, despite its upward fluctuation, is well below that of the 1980s.
If the analysis at the time took place today to establish a criminal rate, it would not be far from that applied by several Canadian banks with their multiple credit cards.
It is high time that governments impose a 15% cap on credit card interest rates on banks and businesses.
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#Standardized #bank #racketeering