Equifax: credit card debt rose by 15%, with younger Canadians facing the strongest hit

The latest report by Equifax shows that Canadian credit card debt skyrocketed in the fourth quarter of the previous year, driven by growing interest rates and high inflation. It turns out younger Canadians were relying on credit more often in an attempt to cope with financial turbulence.

Canadians’ credit card debt was up by more than 15% on a year-over-year basis exceeding $100 billion for the first time.

According to Equifax, overall consumer debt went up during the last three months of 2022 to $2.37 trillion, which is more than 6% higher than a year earlier.

The agency says the influence of higher interest rates on homeowners hasn’t revealed itself fully, as many haven’t renewed their mortgages. However, younger Canadians are already feeling the pinch of inflation especially hard.

Rebecca Oakes from Equifax Canada says the financial stress on Canadians is already seen in the recent data, especially in case of non-homeowners.

“We can see the financial stress starting to come through,” – she noted, pointing to an increase in insolvencies and missed payments on credit products.

Equifax says that although mortgage debt accounts for three-quarters of all consumer debt, and the cost of it has been going up because of growing interest rates, consumers are also struggling with non-mortgage debt, e.g. credit cards.

Non-mortgage debt levels rose by 5.4% in Q4, but in case of millennials, it was an increase of 8.4%.

The hike in non-mortgage debt was caused by active credit usage and reliance on credit cards. The strongest activity was reported in the category of consumers younger than 35. In addition to it, more than 1.4 million new cards were issued.

Equifax explains some of these hikes in non-mortgage debt by growth in immigration and refugee intake, and calls the higher cost of living the main reason for that.

According to the report, consumer proposals rose by 26.4% annually, while they were still lower than before the pandemic (with the exception of seniors).

Mortgage holders begin to feel the hit, although for some of them, it is delayed until they refinance. The agency says the average mortgage holder was paying $170 more monthly than before the pandemic. Equifax believes the number will keep going up.

Other debt products with variable rates (e.g. HELOCs) showed a minimum monthly payment increase of 24% compared with pre-pandemic results.

We want to reaffirm our commitment to the hundreds of Canadian homeowners we help each year by consolidating credit card and high interest debt into one affordable mortgage payment and freeing up extra money for everyday expenses. This is especially important today, in an era of growing unsecure debt and a sharp rise in the cost of living.