As inflation continues to take its toll on Canadians, more people are turning to credit card debt to survive. A new study from Equifax shows that credit card balances are up 6.4 percent compared to the first quarter of 2022. That’s the highest amount of credit card debt since the fourth quarter of 2019 — right before the Covid-19 pandemic hit.
“Using credit is not a bad thing; we all use it and it’s a very important part of society and life in general,” says Rebecca Oakes, the Vice-President of Advanced Analytics at Equifax Canada. “But the rise we’re seeing in the last quarter is quite a significant jump in regards to credit card debt.”
According to Equifax’s report, those with the lowest credit score are upping their balances the most.
Not surprisingly, missed payments on credit cards are also up by 4 percent. This is the third quarter in a row where delinquency rates increased.
It’s also easier now than ever for consumers to rack up credit card debt that is hard to pay off. According to Equifax, the average limit on new credit cards is $5,800, the highest it has been in seven years. And more people are applying for new lines of credit, with a 16.2 percent increase in new cards.
Across Canada, the overall consumer debt is now at a staggering $2.32 trillion. That’s an increase of 8.2 percent from this time last year. The average debt per consumer, excluding mortgages, is now $21,128, which is an increase of 2.4 percent over last year.
Looking at debts across the country, Alberta has the highest average debt of $25,056. Where Nova Scotia sits with $20,701 and New Brunswick’s average debt per person is $21,888. Ontario is also in the mid-range at $21,405.
Canada’s lowest debt per person is in Manitoba at $16,956.
The average #ConsumerDebt is now $20,744, an increase of 1.5% when compared to Q1 2021. It is the first year-over-year increase since 2019. #ConsumerTrends
— Equifax Canada (@equifaxcanada) September 12, 2022
While it’s common for people to put big-ticket items like a vacation on a credit card, there’s evidence more Canadians are putting essentials, like food, on their tab. That is a sign that more people are struggling to get by day-to-day.
“That’s where we are concerned, that some of it may well be consumers who are finding themselves in that situation,” says Oakes.
If this trend continues, it could spell more challenging times for the economy and for businesses. At some point, people will run out of room on their $5,800 credit card. At that point, they will have to stop shopping.
“Consumers are already having to pull back a little bit on some of their spending habits anyway. But that’s absolutely going to start impacting business as well,” says Oakes.
“I don’t think we’re there yet, but it defiantly has potential that it could happen if things don’t improve.”
Derek Montague is a reporter with Huddle, an Acadia Broadcasting content partner.
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