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#Written by David Tam, 1997.           #       
#davidkftam@netscape.net Copyright 1999#
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David Tam
Thursday, January 30, 1997.

                             BUSINESS PRESS REVIEW
                             =====================

Canadian Press "Record sales posted on credit cards". The Globe and Mail.
Saturday, January 25, 1997. B9.                       ------------------

    This article talks about consumer spending on credit, even though the card
rates are much higher than the Bank of Canada rate.  The dollar value of Visa
and Master card transactions totalled $67.7-billion last year, a rise of 10%
from $61.3-billion in 1995.  The potential profit that can be reaped from this
trend is so high that many larger retailers are issuing their own credit cards.
Retailers hope that the consumer will be encouraged to purchase more because it
can be placed on credit, while at the same time, they hope consumers will be
late on their payments so that the high interest rate charge can be applied.
With this in mind, most retailer credit card rates are at 28.8% for late
payments.  With this trend, Canadians had credit card balances owing
$18.7-billion in total in 1996, an increase from $17.4-billion in 1995.

    From a retailer's point of view, this trend seems to be an advantage to
them.  Consumers are still able to spend money despite personal cash flow
restrictions.  For those retailers who issue their own credit cards, their is
an obvious opportunity of generating additional revenue from charging high
interest rates.  Though this may look great on the income statement, it may be
quite dangerous from a cash flow point of view.  It must be kept in mind that
consumers would be given a certain amount of credit with a one month due date.
This can cause stress on the cash flow of the retail operations if the cards
are not managed carefully.  For very large retailers who have a large excess of
cash flow, this may present a better alternative to investing the excess funds
on marketable securities.  The potential for return rate is greater.