Once upon a time, people lived within their means. Then along came banks, and before you could say “IOU”, you were buying things on credit, that is, on a promise to pay the bank for whatever it just bought for you, as long as you would pay it usury, or interest as it is now called. While no debt is good debt, contrary to what some economists like to preach, sometimes it can get you out of a bind. So can saving and planning ahead, but by the time most of us leave home we can’t, because we are caught in the debt cycle, which is where you go into debt because you haven’t saved, and then you can’t save because of your debts, and if you think it isn’t planned that way, you are more naive than I am obnoxious.
A few years back while I was taking night courses at Durham College in Oshawa, I was shocked to find that one of the first things to catch my eye was a 6 foot plus cardboard display telling students to apply for their favourite credit card. As if our youth are not already overburdened with tuition debt, now we need to rush them into credit card debt as well.
Part of the reason that the federal government is so eager to allow the banks to create new money, which is all that debt really is, is to keep our economy chugging along. Most of our domestic purchases, such as furniture and appliances, our vehicles, and even the houses we live in, are debts. Without a continual source of new credit, our economy would shudder to a standstill, or would perhaps even start to deflate.
The bank is getting a piece of us from every angle, and we are the one’s who are letting them, albeit with the encouragement of Ottawa. Eventually this bubble will burst. Bubbles can only expand for so long, until they get too thin, and then they break.
Interest Rates are a bank’s best friend. Whether it is what they pay you for the use of your money, or what they charge you for the money that you just helped create, (more on this tomorrow), a bank is like a casino, they always come out on top.
Online today, one can see that most banks Visa rates go anywhere from 10.9% for a fully secured Visa, up to 20.5%. Keep in mind that the sucker who will pay the highest rate is the one who can least afford it as a rule. What will they give someone on a basic savings account? If you have under $5,000. in your savings account like most working stiffs, in an Investment Savings Account you could reap a whopping 0.025%. The dust that would accumulate on the money if you left it on your fridge would add up faster, not to mention that you would be paying the bank 820 times as much to use their money as what they are paying you to use yours! Were you to save a little money in one of these accounts weekly, the service charges would result in you actually losing money. I guess it doesn’t pay to save. Not at the big 6 anyway.