A new study says that using your credit cards is good for the economy. The study was done by Moody’s Analytics for Visa. It looked at card usage in 56 countries, including Canada, and found that globally the use of electronic payment methods contributed $983 billion to the GDP of those countries. In Canada, that contribution amounted to about $10 billion. In the US, it was $127 billion. The countries studied account for 93 per cent of the world’s total GDP.
Use of credit cards contributed $10 billion to Canada’s economy last year, according to Moody’s Analytics paper for Visa. Globally, the contribution to GDP between 2008–2012 was close to $1 trillion,
Visa’s manager for Canada, Jim Allhusen, said “there’s no denying the benefits of electronic payments,” adding that “the positive impact in economic growth is a direct result of card usage and is tied to the benefits electronic payments offer, including enhanced security, convenience of operating without cash or cheques, increased efficiency at checkout and a reduction in the grey economy.”
The report says that the global economic recovery following the financial crisis of 2008 was aided by the use of credit cards. From 2008 to 2012, it says, global GDP growth was 1.8 per cent. Without the use of credit cards, it would have been only 1.6 per cent. This fact, the report says, helped “mitigate what would otherwise have been an even slower recovery.”
We are not economists, but we can’t help but wonder how this positive spin on the increasing use of credit cards jibes with the alarms we keep hearing from the banks and the government about growing consumer debt. The average Canadian’s consumer debt is at an all-time high, we are told: as of the end of 2012, we each owed $27,485. This is 6 per cent more than we owed a year ago. We added, on average, $1,500 to our personal debt load last year, and this at a time when the Governor of the Bank of Canada and the minister of finance were telling us to hit the brakes.
For now, at any rate, credit card delinquencies are low: according to a CBC report, the rate of delinquency is about 0.3 per cent. That includes credit cards, lines of credit and auto loans. So Canadians are managing their consumer debt, even as it grows.
The Visa report, however, does not address such unpleasantness as delinquency or even use the word “debt.” Far from warning consumers about debt, it reminds us that without credit “consumers using cash or checks may be limited to the amount of funds they have for particular transactions. With cash, consumers are limited to the funds they have on hand.”
Put another way, you can’t spend what you don’t have. Old fashioned as it sounds today, that used to be considered financially sound advice. Now, coming from Visa, it almost sounds like a taunt.
But Visa says the use of cards leads to a “virtuous economic cycle” whereby greater consumption spurs production, which creates jobs, producing greater income for people to spend.
No doubt that is true. Looked at this way, each of us has a patriotic duty to go out and buy something we can’t afford. The more expensive the better. Think of that “virtuous economic cycle” and do your duty.
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