Posthaste: Canadians facing 'payment shock' are running up their credit cards
Good morning,
More Canadians are running up their credit cards as they struggle to make ends meet even though inflation has eased, a new report reveals.
Consumer credit reporting agency Transunion’s second-quarter report found that the number of Canadians holding an outstanding balance was up 3.3 per cent from the same time last year.
The number of consumers with higher credit balances rose across all risk levels, but the highest risk, subprime customers, was up 8.9 per cent.
“The combined pressure of a high cost of living and elevated interest rates has created a payment shock, as the cost of debt has grown even heavier for some Canadian households,” said Matthew Fabian, director of financial services research and consulting at TransUnion in Canada.
“While some financial pressure has been offset through continued savings growth and strong employment, many Canadian consumers have accessed credit as a means to short-term liquidity.”
The average amount of balances on credit overall has also grown as borrowing increased and interest rates rose rapidly on variable-rate mortgages, but credit card balances increased the most, said Transunion. The average consumer now holds over $4,000 in debt on their card, up 9 per cent from the year before.
As the same time the amount customers paid against their card balance decreased by 2.8 per cent.
So Canadians’ debt mountain, already the largest in the G7, keeps getting bigger. Total debt for households, including mortgages, rose 4.2 per cent to $2.3 trillion in the second quarter.
Most of the gain was mortgage debt, which grew by 9 per cent, the fifth quarterly increase in a row, said Transunion. Mortgage costs also increased, with the average monthly payment rising 15 per cent to
Read more on financialpost.com
