Judith Timson August 27 1979


Judith Timson August 27 1979



Judith Timson

It was a sad experience for me. I felt as though I were being cut off from the rest of the world. — Salesman Paul Gindoff, describing how it felt to destroy his six credit cards

He had no choice at the time, but that seems to have faded into the mists of memory. Instead, Paul Gindoff, an outgoing Toronto pet-food salesman with a $14,000 income, a penchant for $250 suits and a habit of treating his friends to food and drink, prefers to see it as a kind of conversion. There he was four years ago, $9,000 in debt, unable to make even the minimum credit payments and still pay his rent. He considered declaring personal bankruptcy but that smacked of public dis-

grace, so he offered himself up for credit counselling and submitted, albeit unwillingly, to a directive to ditch his credit cards. Then, with the zeal of a reformed alcoholic, he cleaned up his life, throwing himself into charity work and off-the-rack blazers. Plasticman, with a wallet full of cards and the fastest signature in town, was no more. In his place—the wary and thoughtful consumer. “For the first time in a long time,” recalls Gindoff, “I actually noticed the price of things.”

In 1979 people don’t talk anymore about the plastic revolution—they live it. In the U.S., two credit cards circulate for every man, woman and child, and in Canada, seven million Chargex and two million Master Charge cards are in use. Plastic awareness, to use the jargon of the industry, has become the economic

opiate of the masses, tne sophisticated yet easy way to go about the business of buying a better lifestyle. And in spite of energy crises and gloom-and-doom economic forecasts, people are still hot on the trail of the good life.

But this goal may be getting harder to attain: American banks report credit card defaults are soaring. In Canada, the number of personal consumer bankruptcies has increased from a relatively modest 1,308 in 1968 to a staggering 15,883 in 1978. This year, a projected 19,000 Canadian consumers will officially declare themselves failures at handling their personal finances.

Unofficially, on the social front, tales of plastic madness are becoming as common as—and may, in fact, be linked to—tedious descriptions of the search for self-fulfilment. Everyone knows someone who has just torn up his card, or is just about to, or wishes he had. Everyone has heard at least one horrifying (but titillating) saga of excess. In Toronto, last year, the journalistic demi-monde was a-buzz with the story of the lady editor, who, planning a dinner party, stepped out to buy salt and pepper shakers and returned with a $1,000 lighter, a Cuisinart, eight crystal champagne glasses, eight crystal dessert goblets and a set of bone china. She said she “got carried away.”

“That seems to be the point of the whole thing,” says Toronto psychologist Larry Pass, who, in his private practice, has treated people head over heels in debt. “Of course people who use credit cards don’t keep track of their expenditures at the time. That is the intention of the people who issue them, and they have been very successful.” However,

bank officials who face criticism of their credit card programs—which are fast becoming the most widely used—do so calmly.

For bankers, the statistic that matters is the one that shows credit card debt comprises no more than 10 per cent of the over-all consumer debt in Canada (which, in 1978, was $35 billion). That, coupled with the fact that between 40 and 50 per cent of the people who use Chargex and Master Charge pay off their bills in full every month—thereby avoiding the 18-per-cent interest charged at a rate of IV2 per cent a month—is all the reassurance that someone like Doug Hamilton, assistant general manager of the Toronto-Dominion’s Chargex Centre, needs to state: “Most Canadians are handling it well.”

And the future . . . well, the future belongs, if not to a cashless society, at least to a less-cash one, with bankers promising us, for the 1980s, more in the way of automatic fund transfers, spe-

cial phones containing slots in which credit cards can be placed to order merchandise, vending machines that accept cards and direct debit systems which result in an immediate withdrawal of funds from the client’s account.

In Canada, the second-largest market after the U.S. for American Express cards, the American Express Company is embarking on a fierce advertising campaign to attract new customers that could cost up to $10 million. In Europe, the crusade is already under way to convince the more traditionally conservative European consumer of the joys of credit card living. “Once they have plastic awareness in their minds, we will do battle for their hearts,” promised one American Express Company official, while the international powers at Chargex-Visa are negotiating with a European Communist country to get on the card.

By this fall, at least one major trust

company—Canada Trust—will begin issuing Master Charge, and the Canadian Co-Operative Credit Society, with more than four million members, has decided to join the card game by the end of next year. There is hardly a major financial institution left in Canada that does not view the card as pivotal to its financial structure.

As for convenience, the tiny perfect pieces of plastic provide instant identification, do away with cheque writing in front of suspicious clerks, offer cash advances and facilitate shopping by phone and travel. Says Toronto financial counsellor Ann Pappert: “If you want to be in what is laughingly called the mainstream of Canadian society, you need a credit card. It sounds like the answer to everything, everybody’s dream.”

But Paul Jerabek, a vice-president and director of Dunwoody Ltd., a major Canadian firm dealing with insolvency, has seen many people for whom the dream has meant more than a few sleepless nights—95 per cent of the bankrupts his company processes used credit cards, many of them unwisely. He suggests: “Maybe they should put a statement on the back of credit cards the way they do on cigarette packages— Warning, use of this card may result in damage to your financial health. ”

“I wish you’d stop calling them credit cards,” complains AÍ Bates, head of the Master Charge program at the Bank of Montreal. “They’re payment cards.” At the Canadian Imperial Bank of Commerce’s Chargex headquarters, one senior official says: “We like to see them as convenience cards.” Whatever, back in the early 1900s they came into being as credit cards. First hotels, then oil and gas companies and department stores began issuing them to select customers. In 1949, the Diners’ Club card was invented, mainly for the expense-account set. American Express followed and then finally, in the 1950s, the banks got in on the action. By 1968, four Canadian banks—Canadian Imperial Bank of Commerce, the Royal, Toronto Dominion and Banque Canadien Nationale— were offering the blue, white and gold Chargex. They were joined later by the Bank of Nova Scotia. By 1973, two others—Bank of Montreal and the Provincial Bank of Canada—began issuing Master Charge. However the card is characterized by the thinkers in profitland, it has clearly changed the way people feel about money and the way they spend it.

“It’s hard to come up with a nice, neat theory about credit cards,” says Larry Pass, a behaviorist who lectures at the Ontario Institute for Studies in Education, “but just listing all the false assumptions people have developed about them should tell us something.” Some users, for instance, talk about the “un-

reality” of using plastic, others about the sense of well-being that comes over them, that whoosh of power, that perceptible boost to the self-image, especially when they’re in the throes of what Peter Kosa, a 26-year-old Windsor, Ontario, salesman wryly describes as “plastic magnanimity.” Says the self-confessed Chargex junkie: “That’s the ultimate horror show, when you go drinking with the boys or out to lunch and you throw down your card.” No muss, no fuss, no fumbling around in the wallet for those old-fashioned pieces of tinted paper that were once palpable indicators of the state of one’s personal finances. With plastic, the over-all financial picture gets blurred in the psychological distance the consumer imposes between the use of his card and his own money supply—as if the two weren’t quite connected. Last spring, during a debate between the Ontario government and Loblaws about whether Ziggy’s, its chain of specialty food shops, should be allowed to accept credit cards (the government said people shouldn’t be buying necessities on credit; Loblaws said why not; Loblaws won), one customer interviewed by a reporter said grumpily: “Of course credit cards should be allowed. Have you seen these prices? How else could anyone afford to shop here?”

Astronomical credit card bills have» become-the liberated lady’s lament.

One woman, a 32-year-old publicschool teacher who has had to take a job teaching nights to pay off a $1,500 Chargex bill, originally applied for a charge card simply to acquire a good credit rating. At first she paid the amount owing in full every month. “But when they raised my limit, I began to feel rewarded in a subtle kind of way, and so I began spending more.” That seems to be a familiar treadmill. Bank officials say the limit is not based on a customer’s ability to pay, but how much they think the customer is going to use the card. If he or she is brushing up against the limit, yet still scraping together the minimum payment due (often a ludicrously low five per cent of the total), then the limit most likely will be raised. The temptation (or invitation) to spend more than one can afford is irresistible.

Men are at least as bad as women. Dunwoody’s Jerabek says salesmen are the worst: “To sell, they need to spend. To spend, they need a card.” And for men, too, there are emotional voids to be looked after: Gindoff, a 43-year-old bachelor, used to feel depressed and lonely and “buy another suit.” Another

divorced-man-about-town amused his friends with jokes about “emotional hardware.” After each shattered romance, he would go crazy buying stereo equipment—a new set of headphones, the niftiest little tape deck.

Banks are reticent about revealing the amount of credit card default for “competitive reasons.” Nor are they forthcoming about the standards they use in issuing the cards. Have they been lowered over the years? J.E. Wightman, a vice-president of the Commerce, prefers to talk about “broadening the standards” rather than relaxing them. Still, there are curious cases of people with credit cards who clearly have no business with them. A Mississauga, Ontario, woman Mary Wright was making $70 a week in a warehouse when her bank gave her a Chargex “automatically.” Divorced, with three children and a history of financial problems, she used the card three years ago to buy a $500 air conditioner for a male friend. She still has not paid the bill and when the bank recently attempted to garnishee her wages, she quit her job as a dishwasher in a restaurant and went back on welfare. She had to laugh recently when a Toronto department store representative phoned to ask if she would like one of its cards.

There are also students, who, on the strength of a summer job, acquire one (or even two) cards and then live off them the rest of the year while they’re studying. While Peter Kosa was studying at the University of Toronto, he and his wife, Mary Anne, ran his credit limit from the standard beginner’s $250 to $1,500 within two years without even having a steady job. “We didn’t have the money to buy groceries so we went out to dinner and put it on plastic,” he says. “Every time we went over our limit, we’d send them a few bucks and they’d bump it up.” Then there was Christmas—a card junkie’s nightmare: “I was still paying for Christmas the following May.”

For all that, there aren’t many people in 1979—and that includes credit counsellors, consumer advocates and skip tracers—who would come out foursquare against plastic. It has already become an indispensable part of everyday life. Even Paul Gindoff, the credit card burn-out who says he felt like that other Paul, the one who found God on the road to Damascus, the day he ripped up his cards, has been born again into the world of plastic. After repaying his debts in record time, he recently applied for and received two shiny new bank credit cards. He was pleased: “It was kind of a challenge,” he said, “seeing first of all whether I could get them back—and then seeing if I could use them properly.” So far, so good.