A report on Tuesday by credit bureau Equifax Canada showed that the practice is pushing Canadians into debt as their balances have begun to exceed their ability to pay back their credit.
In the most recent quarter, credit card balances reached their highest level since the last quarter of 2019, according to the report. His credit balance increased by 6.4% between the first and second quarters of this year, and people are buying more credit. card too.
Rebecca Oakes, Vice President of Advanced Analytics at Equifax Canada, said: She added that the rise in non-mortgage debt is one of the more enlightening trends revealed by the report.
Somewhat predictably, rising home prices and low-interest rates in recent years have pushed people to take advantage of the market, and mortgage debt continues to rise.
But it’s the debt incurred outside the housing market that’s causing the problem as per, free classified ads sites.
“We all know that house prices have been going up over the last few years … so is mortgage debt, but it’s the non-mortgage part that we’re interested in right now. ”
Consumers with low credit scores and who are already at risk of missing payments are among the consumers most likely to experience changes in their credit balances. With a credit score below 620, his credit balance has increased by 16.2% since the second quarter of 2021.
But an increase in credit card debt is being seen across the board, Oakes said. “Lots of people across all ages, different credit risk scores, different geographies.”
All the while, lenders are offering “unprecedented” high credit limits, Oakes said. Equifax reports that his current average credit limit is $5,800.
The survey results reflect June 2022 data released by Statistics Canada. last month chartered bank’s credit card debt rose 1.6% from the previous month, according to the data agency.
This five-month increase is the latest indicator that Canadians are increasingly relying on credit cards to manage ballooning costs, used to buy food, clothing, and technology. So are other consumer trends such as “buy now, pay later” services.
Prices go up but wages stay the same
Nicolas Gislason, an Uber Eats driver and student living in Toronto, said he believes it is impossible to make ends meet on the current minimum wage.
“I’m going to buy a computer with my mother’s credit card because I have no other choice,” he said.
Several people interviewed by CBC News said that as inflation and interest rates rose and the cost of living became higher, wage increases were not seen to make up the difference.
Melanie McKellan of Vancouver said, “None of us have gotten a raise since inflation went up, so the cost of living is going up, not wages. So, of course, people end up using credit cards.” I will,” he said.
Kelly Taylor, a Vancouver-based personal finance expert, told CBC News that sound financial habits (including regular debt repayments) formed from the situation during the pandemic will help keep inflation at bay this year. said he could not bear the rise in interest rates.
When interest rates go up, “anyone with a loan, a floating rate mortgage, a mortgage line of credit, a home equity loan, a student loan will end up paying more. A little more cash short.” ‘ said Taylor.
Analyzing credit card bills to forget monthly payments or buy subscriptions is one way to save money, she says. In grocery stores, the unit price (the price of a unit of measure) displayed under each item is the most reliable indicator of a transaction, she says.
The Bank of Canada has aggressively raised borrowing rates since the beginning of the year to combat high inflation, which peaked at 8.1% in June.
Russia’s war in Ukraine has pushed global inflation higher since February, with food and energy prices skyrocketing and supply chain delays contributing to additional costs at the retail level.
In July, the central bank announced another big rate hike of 2.5%. But Canadian economists expect an even bigger increase at next week’s Sept. 7 meeting.
Taylor notes that people are paying more to leave their homes as pandemic-related restrictions are eased. Whether it’s a road trip to see relatives who need a full tank of gas, an expensive plane ticket to get there, or even a pickup. Restaurant and bar tabs, surveys, websites to post free ads, and suggestions.
She, too, said that as inflation climbed to 8%, Canadians found their wages to remain the same and these consumers turned to credit cards to “mind the gap”. said.
Esther Imafidone, who moved to Canada from Italy in 2019, said she relied on credit cards and is currently unable to save money due to late payments and accrued interest.
“It’s stressful,” she said. “I have a credit card and I use it and that’s the only thing because I can’t save… I’m in a lot of debt. I’m in a lot of debt with my credit card. I have.”
Using a credit card is “easy to do, so it’s the first thing I do when I’m short on money,” says Taylor.
“There’s not a lot of friction when it comes to tapping a piece of plastic to make up for that shortfall.”