Chapter 7

The article: http://www.thestar.com/business/article/611151

Canada's recession and decreasing employments have caused the government to become more involved in credit card companies. Statistics say that credit card losses are quickly pacing up to the number of losses in past recessions. Because of this, many major banks are beginning to enforce rules that are more strict towards high-risk clients regarding lending out money, and raising the credit card limit. CIBC is one that has already begun doing so, and are seeing positive results. The growing percentages of consumer loss ratios, credit card losses, personal bankruptcies and job losses, are persuading the government in Ottawa to step up and take charge of the credit card industry. The NDP is already considering making a consumer bill of rights. On the other hand, many credit card companies such as Visa is arguing that government intervention may limit competition, therefore hurting consumers.

This article about credit cards and what the credit card industry is planning to do connects with the material in the textbook because Canadian banks are planning to change and make new decisions that will affect the consumers in Canada. Credit cards are very popular amongst households, and they may be the reason why many families are able to support themselves. Seeing the statistics of growing personal bankruptcies and job losses in Canada, it is safe to say that cash is becoming less available for Canadian households, making credit cards even more important. Banks that offer credit cards have to be more stingy in lending out money, as they're taking into account the amount of cash or assets they actually have before they can lend out big loads of money to just anyone.

Aside from the reason that many people are getting laid off from their jobs, which results in a lower income and less cash, I think another reason for the high credit card losses is because of what the consumers are spending it on. In my opinion, credit cards should be used for mainly necessities. If people start buying things that they don't really need with their credit card, along with the things that they do need, the amount of money they owe will of course increase. Whereas, if necessities were bought with credit, and the extras were bought with already existing cash or assets, one's debt would not be as great, making them being able to pay off easier. In addition, government intervention for credit card companies, and the fact that the rules may be more strict, may ultimately harm the economy instead of help. Consumers would spend less because of these limits, therefore not helping the economy.