Why are individuals warned to cut back on credit card debt and told that it will ultimately harm the economy?


Should everyone cut up their credit cards, or is there a happy medium?


CREDIT CARDS CAN BE USEFUL AND CONVENIENT, but if you aren’t careful, you can put yourself on a path to serious fi nancial trouble. There is also a broader societal issue in that “while consumer spending can create jobs and economic growth, extreme debt-fi nanced consumer spending can reduce subsequent spending if interest rates go up and consumers fi nd that they cannot service their old debts at the new higher interest rates,” says Amin Mawani, associate professor of accounting at York University’s Schulich School of Business. “When consumers hold back on their spending, businesses experience reduced sales, which makes it harder for them to raise new equity.” And so a downward spiral begins.


can play in a person’s life cycle”


MARY TERESA BITTI is a freelance writer based in Oakville, Ont.


A new survey of household fi nances released by CPA Canada in March 2015—“Household Finances in Canada: Time for a Reality Check”—shows Canadian household debt at record levels ($1.82 trillion). For more details, see summary and full pdf report at https://www.cpacanada.ca/en/connecting-and-news/ news/professional-news/2015/March/Household-fi nances-Canadians-at-risk


MAY 2015 | CPA MAGAZINE | 39


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