Amanda Lang: As COVID-19 hits economy, time to give credit card rates a closer look
OTTAWA -- The federal government is asking banks and credit-card companies to lower interest rates for Canadians, many of whom are struggling financially because of the COVID-19 pandemic.
The government is also looking at extending lower-interest credit directly to consumers, Prime Minister Justin Trudeau said, in his daily update to Canadians on Thursday.
"I can assure you that the finance minister has had conversations directly with the banks about credit card interest rates," he said.
"We recognize that they are a significant challenge for many Canadians at this point. That is why we are encouraging them to take action to alleviate the burden for Canadians. At the same time we are looking at our end at making credit more available and less expensive for Canadians to be able to make it through the next few months."
The major banks did not immediately respond to requests for comment.
Earlier this week, however, the Bank of Montreal said it is deferring payments on small business credit cards and credit lines and on the principal of small business loans.
The Bank of Canada has lowered its trend-setting interest rate to try to cushion the blow to business from a slowing economy but credit-card interest rates, the ones that matter most directly to most consumers, remain high.
Many interest rates on credit card debt hover around 20 per cent, though some are as high as 30 per cent.
NDP finance critic Peter Julian and industry critic Brian Masse have been calling on the federal government for days to ask banks and credit-card companies to lower interest rates.
"So far, the government has found ways to help corporations right away, but they are still making Canadians wait weeks," said Masse in a statement. "Waiving the interest on credit cards for two months would immediately help Canadians get through until the federal programs kick in."
Trudeau said the government is spending billions on programs to help individuals pay their bills over the next few months as the novel coronavirus forces people out of work due to illnesses and enforced closures.
He says lowering the costs Canadians have to pay as they rely on borrowing to cover their expenses is another part of the effort.
Parliament passed an emergency bill Wednesday that puts $107 billion on the table to help, including $52 billion in health care spending and direct aid such as top-ups to child benefits and GST rebates, as well as payments to workers who have lost their income because of COVID-19.
Another $55 billion is earmarked for tax deferrals, allowing businesses and individuals to put off paying tax bills for several months.