Canadians show the third monthly gain of credit card debt in a row

According to the latest report by Statistics Canada, households are seeing their credit card debts grow faster.

In February, credit card debt issued by chartered banks rose by 1.45% and reached $1.3 billion, marking the third monthly gain in a row. In addition to it, non-mortgage loan debts were also up by 0.4% to $2.8 billion.

An annual comparison shows that consumer debt in February went up by 14.5% while balances on home equity loans stayed unchanged at $170.5 billion.

“Still high interest rates and inflation will probably keep putting financial pressure on households as they continue to use credit as a way to fund their spending, especially when we talk about more vulnerable groups,” – the report noted.

In general, household spending for goods and services rose in the first quarter of this year.

The report says Canadians are spending more on travel with expenditures from abroad going up by 6.8% in Q1. Dinning also rose by 4.4%, while spending on alcoholic beverages grew by 6.5%.

The increase in spending follows minimal growth reported during the previous two quarters, the report added.

However, there’s also one positive aspect in this debt picture – it’s the expected resilience of the Canadian consumer, mentioned in the results of a survey by TransUnion.

TransUnion’s report shows that credit card usage has risen by 20% annually in the fourth quarter of 2022. Total outstanding balances were up by 5.6% and reached a record $2.32 trillion.

Moreover, we’ve seen an increase in new credit cards issued, which is mostly driven by Gen Z (6.2%) and newcomers (85%).

In spite of the difficult economic conditions, the report says it expects the consumer to cope.

“We believe the next 12 months will be a combination of resiliency and financial fragility,” – it said.

It pointed to an eventual moderation in the interest rate environment and a strong labour market as the main reasons why Canadians will withstand higher debt levels.

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.