Debt becomes us

Garry Marr, Financial Post

It was a stinging rebuke. I took it on the chin last weekend as I waited in line for a ride with my child at an amusement park in Toronto.

 “My dad has a BlackBerry,” the little monster gloated in front of my own boy as he looked at my bottom-of-the-line cellphone.

 I hate having a cellphone but my spouse says it is a must in case of emergencies. (I’m not sure how my mother ever got a hold of my father in emergencies back in the 1970s. He didn’t even have a walkie-talkie).

I tried to explain to the young lad that I spend as little money as possible on my cellphone, opting for a $50 piece of junk that lets me pay per call — something I don’t do much of usually.

“Don’t you know you can get a BlackBerry for free,” he said, looking at me as if I am the dumbest adult on the planet.

Of course, I don’t expect a child to understand that signing up for a “free” cellphone means a commitment to three years of payments that could easily add up to more than five times the cost of the phone that you got for “free.”

Adults understand the deal. They just don’t care. Everybody wants a free BlackBerry or next-to-nothing iPhone today if they can pay for it tomorrow.

The enormous debt levels in Canada, now 140% of personal disposable income, do not even include all the financial commitments and contracts we have from cellphones to car leases, says Doug Porter, deputy chief economist with Bank of Montreal.

“Most of the traditional measures are the classic borrowing on credit cards, consumer loans and mortgages,” says Mr. Porter. “In the early 1990s, debt was underestimated because it did not take into account the leasing of cars.”

Terry Leon, chief executive of Leon’s Furniture Ltd., proudly claims his company pioneered the whole “do not pay until” programs, which allow consumers to walk out of stores without putting up one cent.

“We are going on as long as 100 weeks in honour of our 100th anniversary,” says Mr. Leon, referring to the fact consumers can now buy something in his store and not pay for almost two years.

There is a difference from most debt with his store because Leon’s does not charge interest. That $1,500 couch is the same price whether you pay for it in full the day you buy it or wait the full 100 weeks before making your full payment.

On its anniversary, more than half of Leon’s customers decided not to pay that day. That’s not hard to understand. Why would you empty your pockets when you don’t have to?

Credit, or temptation, is still everywhere. Even after what has been described as one of worst recessions in history, I’m still being offered financing for everything from fixing my smile to buying a new television set.

I get an offer for a new credit card about once a week and the list of things I can charge on that credit card expands every day. If I was worried about that monthly cellphone commitment, all I have to do it is tack it on my credit card.

I was incredulous when a friend told me he was able to gamble on horses at the racetrack with his credit card. “It just comes up as a charge like it would if I bought something at the Bay,” he told me.

Not that I doubt my friend, but I went online to see if I could set up a gambling account with my credit card. It takes about three clicks, once you plug in all your information.

Scott Hannah is president of the Vancouver-based Credit Counselling Society, a non-profit group that helps consumers find their way out of debt. He notes a strong surge in demand for its services. “Compared to a year ago, the demand for our services is up 118% from last September,” says Mr. Hannah.

With debt levels as high as they are today, consumers have little cushion to deal with any downturn in the economy. “They just can’t handle any bumps in the road,” says Mr. Hannah.

Those bumps hurt a lot more when you have no cushion or savings.

If you’re going to be in debt, why not look for the best deal? The Financial Consumer Agency of Canada has a great website (fcac-acfc.gc.ca) that compares credit card benefits.