Ha, Canada. I expected cultural differences. I discovered the streetcars in the middle of the road, the 13% tax added on at the cash register, the cream-style corn, the price of the butter, and the lack of “lardons,” essential when making a French quiche.
But my discovery of how the financial system functions here shocked me and made me ask myself many questions. In 2011, the average Canadian family had an estimated debt of $176,461. We never had a debt in my family. And we were poor. But having debt was purely inconceivable for anybody in my family. Debt means having home ripped away from you: your house, your roots, and your family.
Some notes: the fact that I am also talking about the French system does not mean that I endorse it or that I believe it is a better system. God no! This confrontation of two systems is something that I find necessary nowadays when specialists announce another imminent financial crisis.
I’ve been hearing for a few years now in France, “We need to boost consumption.” And I ended up understanding why: because in France, you pay a tax of almost 20% on everything you buy. Everything. And that 20% goes into the state’s pocket. Who gets paid first? Teachers? Nurses? The police? Nope. Politicians, of course. So I have understood for a long time now why politicians wanted us to consume.
However, it took me a long time to understand the principles of the Canadian economy. Here is why I think you should pressure your government to end the reign of the credit card!
The credit card is like a gun against your back designed to blast you into the void of eternal debt.
You have to fight temptations, like this one: buy one for the price of two. I know, I was tricked too: the classic story. Say you’re going to this mall to buy yourself a parka for next winter. Hey, good news, there are some sales. Whoa, 50% off on the second one? I’ll buy it! A $13 pair of shoes is quite reasonable, after all. A second pair for $1? I’ll buy it. Whoa, and I definitely need this T-shirt with the Harry Potter houses logo on it. No joke, I need it.
Well, congratulations: you come out of the shop, which you only entered by chance, without your parka, but with 87 dollars less in your account.
A winter coat later, a few odds and ends at Walmart, and voila, you’re eating soup for the rest of the month.
Imagine a credit card, which allows you keep spending almost as much as you want, till the end of the month when you have to pay it back.
A revelation for a Frenchwoman. A shudder of horror as I think back to my early years when I spent hours walking along Rue de Rennes in Paris and spent my money without keeping track. Fortunately, I have grown up since then, and luckily for my finances, I did not grow up in Canada!
A credit card makes you consume without thinking.
Let me tell you one thing: it’s a damned vicious system. You spend, and then you are asked to pay up later.
And don’t tell me, “Hey, it’s up to consumers to know what they’re spending!” Human beings are not rational. We are creatures steeped in pride and emotion. And marketing campaigns know very well how to use that.
Use this cologne and you will feel like Chris Hemsworth.
Wear that watch and you will be Leonardo DiCaprio.
Remember when you were a kid at school, and there was this mean kid who convinced you to play a game with him? The little rascal knew about the risks, but he made you take them in his place. And one day it all went wrong, and it was you who got hurt, who fell out of the tree, or who got punished. And this little brat not only didn’t defend you, but abandoned you like a coward.
That dirty brat is your credit card. Or, more accurately, the bank behind it.
And you, the nice citizen who wants to respect the rules of the game, you are now trapped by Facebook and Google, who are following you. I know that tomorrow I will see a Starbucks ad in my newsfeed because the pixel that Facebook put on my phone knows that I am here as I write this article. Google and Facebook are the two dirty kids who go to the school principal.
And because I have just typed the names of two famous actors and the brands that they promote, tomorrow you may see advertisements for these brands. Or you may see a news story about the love life of Mr. DiCaprio.
Truly, you are tracked by mini software: imagine two or three people who follow you with a notebook. They scrupulously record everything you do, watch, touch, eat, drink, even contemplate for one second, the people with whom you speak, the subjects of your conversations, everything.
They surely know you even better than your friends do. But they are not your friends, since they sell your information to all those advertisers who want you to buy and spend without keeping track. Dirty tattle-tales, I tell you.
And then there comes the icing on the cake, or rather the cheese on the poutine: the more you spend, the more you are rewarded. Two per cent of your purchases are placed on an account that generates interest for you at an online bank. Wow. You Canadians must go crazy!
I admire this sleight of hand that Canadian banks have managed to make you buy into.
And your employer?
Not on your side, my friend: they pay you every 15 days, to help maintain this whole illusion, so you always have money rolling into your account.
The truth is: I admire you, Canadians.
How do you Canadians manage your finances? Do you check each transaction with an app on your phone? Do you make lists of your purchases that you plan to make, and do you anticipate the amount of money needed for each one at the beginning of the month? Do you do a meditation exercise before each purchase?
If one day you come to live in France, you will only have one card, which is actually a debit card. Even though it is called a “credit card,” it is really a debit card: you can only spend what you have on your account. You can exceed that limit, up to a certain amount. But if you reach the limit that you agreed to with the bank, you are stuck. You cannot go further. Your priority once you have reached that amount is to pay your overdraft, the gap, and also pay the interest. You will have to repay the advance made by the bank on your expenses by paying interest.
And this interest is a percentage of the amount of your overdraft: a deterrent amount.
Thirty euros in overdraft costs, just because I couldn’t control myself, seriously gets on my nerves. And here is what I would say to my sister if I were billed 30 euros tomorrow: “Damn, I could have gone to a nice restaurant.” Yes, I know, mind-blowing: we French people think about food all the time. Literally all the time.
But this overdraft authorization is not a right: in the French system, if you have no money… well… you have no money. You had better earn more, and quickly!
When the overdraft exceeds 200 euros for more than 90 days, it must be automatically reclassified as consumer credit. But for me personally, the interest you have to pay on your overdraft is very dissuasive. And successive letters from the bank remind you that the bill is coming and that it will be steep. I have always paid my overdraft in less than 30 days… so as not to deprive myself of a trip to a restaurant, of course.
I would rather die than let my banker use my money to go out to eat.
I even asked him to lower my overdraft authorization to 600 euros instead of 2000 euros to force me to manage my money even better and save.
I am very critical of the French banking system, but I must recognize its immense attribute: we are not trying to fuck you over. We empower you from the start.
If you have the money, good for you. If you don’t have the money, we give you a margin but don’t mess around either.
The limits are obvious and very strict. If you exceed your limit, your name will be on file you won’t be able to obtain a loan for your car, your real estate, or your MBA. You’re fucked.
The three tricks of this vile credit card.
- Vicious thing # 1 is that you go into debt. Your financial life is therefore based on this gaping hole, or more precisely the acceptance of this hole. No wonder then that in Anglo-Saxon culture, the engine of success is money, when in France it is… something else. Quality of life surely. (Which includes food, of course.) I understand the ease with which you accept the idea of having two or three jobs at the same time. It’s normal when you have two or even three bank cards in your wallet!
- Vicious trick # 2 is that you have to use your credit card: you have to share your credit score to rent an apartment here in Canada. And a credit score is also required to buy a house. You have to spend on credit to show your financial capacity. You have to go into debt to show your ability to pay your debts. Absurd, yet ubiquitous. Unthinkable and unacceptable to me.
- Vicious trick # 3: you are therefore obliged to buy things with your credit card. Banks dream of seeing checkbooks and money disappear. What better way to look through your expenses, learn about your personal and financial profile… in short, spy on you and ultimately control you better.
I know that many people will not agree with me: but your credit score is a real, institutionalized way of taking your financial future hostage.
I understand better now why there are “mortgage” and “debt clearance” agencies in Canada. They do not exist in France. And it is not possible to combine several loans. The banks simply communicate with each other about your financial profile. And yes, we are already widely documented and controlled! By the way, in the word mortgage, I see the word “mort:” do you know what that means in French? Death. Yup.
Moreover, any financial system, no matter what country it is in, should not allow uncontrolled multiple loans, and bank agencies should alert social services to people in debt with over 1000 euros of overdraft. The banks want to be bailed out by the citizens in the event of bankruptcy, but quietly let these same people sink even deeper when they are neck-deep in debt. How many people do not want to swallow their pride and go to social services for help? Again, we are creatures steeped in pride.
What if the real solution to debt were elsewhere?
What if the solution for all indebted families, to this subprime mortgage crisis in 2008 that affected us all, were right under our noses?
Why then encourage citizens to spend, without keeping track? Above all, why consider unrestrained consumption as a sign of good economic health in a country?
Could it be degrowth? I’m trying to live with zero waste, and I already see quite a difference in my purchases, my behavior. Could degrowth be a sign of a country’s economic health? When I almost got put onto the national debt list, I realized that I had to learn to manage my finances. I started to read up on the subject, to calculate better, to make summaries of expenses, and to measure the impact of my emotions on my purchases.
What if education were the solution?
In May 2011, the Financial Consumer Agency of Canada (FCAC) and the Organization for Economic Co-operation and Development (OECD) held a conference on financial literacy in Toronto. In their report, some 400 stakeholders pointed to the role that low levels of financial literacy played in the financial crisis.
In Japan, children receive financial education: they receive a sum of money each week and have to manage it. Financial education represents a considerable investment made by the government.
In countries like Australia, Hungary, the Czech Republic, the United Kingdom, and New Zealand, financial education is even mandatory.
I must say that since educating myself financially and learning to detach myself from my emotions and the power of my ego, my banker likes me better. I ask him more questions about the financial products he is trying to get me to buy into, and I have put my money elsewhere. He likes that a lot less. But at least he respects me.
So how do you resist, my dear Canadians? And in these troubled times due to Covid-19, I’m sure you have a new opinion about this whole financial system.
Self-hypnosis? NLP? Self-suggestion? Yoga to break your ego as it seeks omnipotence with flat screen TVs and alluring dresses? Or Kakeibo, the Japanese method, in the way of Marie Kondo?
What do you think? Are you okay with the credit card system?
What financial education do you give your children? Is this something you would like to see changed? Is it time for you, Canadians, to ask for a complete remodeling of your financial system?
