Increasing Number of Canadians Facing Credit Card Balances Ballooning Amid Cost-of-Living Crisis and Higher Interest Rates: Report

The Cost-of-Living Crisis: Canadians Struggle with Rising Credit Card Balances

A recent report by TransUnion has shed light on the increasing financial strain faced by many Canadians as the cost-of-living crisis and higher interest rates take a toll on household budgets. According to the report, the number of Canadians paying only the minimum monthly amount on their credit cards has risen, with 1.3 per cent of consumers opting for this approach in the first quarter.

Matthew Fabian, director of financial services research at TransUnion Canada, highlighted the challenges faced by many households, noting that incomes are not keeping up with inflation and higher interest rates. This has led to a growing reliance on credit, with some consumers prioritizing mortgage payments over credit card bills, resulting in higher delinquency rates.

The total consumer debt in Canada has reached $2.38 trillion in the first quarter, reflecting a slight increase from the previous year. The report also revealed a significant rise in the number of Canadians holding credit products, driven by newcomers and gen Z individuals entering the credit market for the first time.

Interestingly, the report showed a 30 per cent surge in outstanding credit card balances among gen Z consumers, highlighting the challenges faced by younger individuals who are still learning how to manage their finances. Millennials, on the other hand, hold the largest portion of debt in the country, likely due to their evolving financial needs as they age.

Despite concerns about missed payments and financial vulnerability, Fabian expressed confidence in the resilience of the Canadian consumer base. He noted that households typically prioritize mortgage payments over other credit products and suggested that potential interest rate cuts could provide relief to struggling households in the future.

As the market looks towards potential interest rate adjustments in the coming months, Fabian remains optimistic about the prospects for Canadian consumers. While challenges persist, the report underscores the importance of financial literacy and responsible credit management in navigating the current economic landscape.