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When someone’s credit-card bill arrives with a higher number than his or her bank balance, it can be a daunting moment. But, just when it looks like they’ve reached their max, the bank sends a notice to say it has increased their credit. It may feel like winning the jackpot, but it’s a slippery place to be, as people find themselves sliding more into debt with no way of climbing out. Kelly Hechler, a spokesperson for TD Canada Trust, said adding to people’s credit limit isn’t a trick used to get people spending. She said her bank has strict guidelines that must be met before handing over credit. “We have to look at each individual customer,” said Hechler. Before lending money, a bank looks at a person’s income, history of paying bills on time, any collateral items and current debts. Those figures are used to make a debt-service ratio to determine if they can access more cash. It’s not the bank’s job to monitor a person’s spending habits, said Hechler. “You have to demonstrate your ability to pay, and if you’re using one credit card to pay for another, maybe using credit isn’t the healthiest way for you to spend.” If a person is using debt for the wrong reasons, or spending is out of control, all banks have someone to sit down and talk to, she said. “Ultimately, each person is responsible for their financial situation. Think about consolidating your credit cards for a lower rate, or talk with a credit counselling resource. If you don’t take control, it can be stressful and frustrating when you need more credit, but can’t get it.” Gail Vaz-Oxlade, host of television’s “Til Debt Do Us Part,” has seen many families drowning in debt. And it’s her old-fashioned cash-in-jars approach that finally gets the message across to her clients. She makes participants withdraw money and put the bills into jars for transportation, rent, food and entertainment. As they write down their spending, they actually see the cash disappearing. Her catch phrase is that people have to get to the end of the month before they get to the end of the money. She has a good explanation for how society got into this spending pattern. “Many years ago, you couldn’t get a line of credit if you weren’t credit-worthy,” said Vaz-Oxlade. “It was only the triple-A client who was investing in renovations to their house, for those with a huge net worth, that could get a revolving line of credit.” But then banks started selling credit, and the public bought into the idea. “We started to think of credit as disposable income, and how we could work the minimum payment into our income.” People don’t think about how long it could take to pay back $30,000 before jumping at the chance to use it, she said. “As a society, we’re determined to have everything we want right now. We don’t want to have to choose or prioritize and deny ourselves anything.” Vaz-Oxlade makes people own up to their spending habits, but said it’s not entirely their fault. In order to get a credit card, the bank uses that debt-service ratio, and Vaz-Oxlade said that system has “gone out the window.” “I had one man on the show who had 17 credit cards and only earned $35,000 a year. He had access to $100,000.” With most people no longer using printed bankbooks, many people don’t bother to look at their monthly spending. And, after 15 years writing financial columns with little fanfare, Vaz-Oxlade said it’s her basic money-in-jars approach on television that hits home with viewers. Her first tip – aside from sitting down and planning a sensible budget to pay bills – is to make a wish list of future purchases like shoes or tools. “You can’t shop blindly and get things just because they’re on sale. The whole philosophy that it’s a deal isn’t true if you don’t need it. If you don’t make a list, you’re a fool putting yourself at the whim of marketing.” One piece of advice from a local financial adviser is to simply put away the plastic if you want to stay out of debt. Julie Larsen, a financial planner with Investors Group, said if people are serious about surviving the cash crunch, it’s time to go back to basics and save up for purchases. The first mistake is that people spend money as soon as they earn it – on things as small as coffee. “People wonder why they have no money left. If they’re spending $10 a day on coffee and lunch, then going out on the weekends, that could be the reason,” said Larsen. Another problem is that people get lured into buy-now-pay-later offers from local stores. “If you pay for it later, that money is going out the door in the future, and there’s no room to put money into savings or a retirement savings plan.” As a rule of thumb, people shouldn’t have more than 40 per cent of a debt load compared to income. Larsen said people should take a quarter of their salary and put it into savings. The rest can go to mortgage or rent payments, food and paying bills. To protect themselves in case of an emergency, people should also set aside three to six months’ salary, or have access to it through a line of credit, said Larsen. [email protected]