It’s shaping up to be a good holiday season for collection agencies and skip tracers.That’s because total Canadian consumer debt — mostly credit cards — stood at $2.4 trillion in the third quarter of the year according to credit reporting agency Equifax, an increase of $80.9 billion from the same time last year.By way of comparison, the federal government debt stood at about $2.1 trillion in 2023, according to the Fraser Institute.But unlike the feds, Canadian consumers are paying upwards of 20% compounded interest on their unpaid balances, which rose to $113.4 billion in the quarter or an average of $4,119 per card holder. That’s up from $3,727 in the third quarter of last year..Unlike the feds, Canadian consumers are paying upwards of 20% compounded interest on their unpaid balances..According to Equifax, more and more Canadians are taking out new credit cards at loan shark rates just to make ends meet. More than six million new cards were issued in the past 12 months, up about 13.7% from 2022.“The increase in credit card debt is being driven by several factors, including the rising cost of living, higher interest rates, and the economic slowdown,” noted Rebecca Oakes, Equifax Canada’s vice-president of advanced analytics. “These factors are putting a strain on household budgets, making it difficult for many Canadians to make ends meet.”Part of the reason for the increase in issued credit cards is chalked up to population growth, but the report notes that”increased financial strain may also be to blame.”“Even if we take into account the increased costs of goods due to inflation, the growth in card balance compared to last year is still substantial,” added Oakes, “Monthly spend levels on cards have stabilized in recent months, so changing payment levels are contributing to that balance growth.”.The report also highlights a trend of missed payments on all types of credit products across the country, but especially in British Columbia and Ontario. The percentage of Canadians who missed a payment on at least one product increased from 1-in-31 during the pandemic to 1-in-25 in Q3. Over 139,000 more consumers missed a payment compared to 12 months ago, it added.Led by car loans and unsecured lines of credit, the overall non-mortgage balance delinquency rate (where no payment has been seen for 90 days or more), stood at 1.2%, up a whopping 29.2% from 2022. Ontario and British Columbia saw above average rises in so-called ‘severe delinquencies’, increasing 35.4% and 34.5% respectively, compared to the prior year.Credit card payment behaviour can be a major indicator of financial stress, Equifax said. In that regard, credit card delinquency rose by 15.8% during the quarter, with consumers aged 36-55 seeing the largest increase at 20.8%. The percentage of card users only making minimum payments rose by 3.4% in the same period, while the percentage paying their balance in full fell 1.5%. Additionally, the drop in full payers was seen to be more visible on consumers with a high HELOC balance (>$50k) which as a group are more sensitive to interest rate increases, Equifax said..“Unfortunately for other consumers, the indicators are that financial strain is picking up pace.”Rebecca Oakes, Equifax Canada.And though overall delinquency levels are still below pre-pandemic levels, the underlying trend is going in the wrong direction.“There is still some positive news when it comes to missed payments as overall delinquency levels remain below what we saw pre-pandemic and some consumers are still weathering this difficult period well,” said Oakes, “Unfortunately for other consumers, the indicators are that financial strain is picking up pace.”
It’s shaping up to be a good holiday season for collection agencies and skip tracers.That’s because total Canadian consumer debt — mostly credit cards — stood at $2.4 trillion in the third quarter of the year according to credit reporting agency Equifax, an increase of $80.9 billion from the same time last year.By way of comparison, the federal government debt stood at about $2.1 trillion in 2023, according to the Fraser Institute.But unlike the feds, Canadian consumers are paying upwards of 20% compounded interest on their unpaid balances, which rose to $113.4 billion in the quarter or an average of $4,119 per card holder. That’s up from $3,727 in the third quarter of last year..Unlike the feds, Canadian consumers are paying upwards of 20% compounded interest on their unpaid balances..According to Equifax, more and more Canadians are taking out new credit cards at loan shark rates just to make ends meet. More than six million new cards were issued in the past 12 months, up about 13.7% from 2022.“The increase in credit card debt is being driven by several factors, including the rising cost of living, higher interest rates, and the economic slowdown,” noted Rebecca Oakes, Equifax Canada’s vice-president of advanced analytics. “These factors are putting a strain on household budgets, making it difficult for many Canadians to make ends meet.”Part of the reason for the increase in issued credit cards is chalked up to population growth, but the report notes that”increased financial strain may also be to blame.”“Even if we take into account the increased costs of goods due to inflation, the growth in card balance compared to last year is still substantial,” added Oakes, “Monthly spend levels on cards have stabilized in recent months, so changing payment levels are contributing to that balance growth.”.The report also highlights a trend of missed payments on all types of credit products across the country, but especially in British Columbia and Ontario. The percentage of Canadians who missed a payment on at least one product increased from 1-in-31 during the pandemic to 1-in-25 in Q3. Over 139,000 more consumers missed a payment compared to 12 months ago, it added.Led by car loans and unsecured lines of credit, the overall non-mortgage balance delinquency rate (where no payment has been seen for 90 days or more), stood at 1.2%, up a whopping 29.2% from 2022. Ontario and British Columbia saw above average rises in so-called ‘severe delinquencies’, increasing 35.4% and 34.5% respectively, compared to the prior year.Credit card payment behaviour can be a major indicator of financial stress, Equifax said. In that regard, credit card delinquency rose by 15.8% during the quarter, with consumers aged 36-55 seeing the largest increase at 20.8%. The percentage of card users only making minimum payments rose by 3.4% in the same period, while the percentage paying their balance in full fell 1.5%. Additionally, the drop in full payers was seen to be more visible on consumers with a high HELOC balance (>$50k) which as a group are more sensitive to interest rate increases, Equifax said..“Unfortunately for other consumers, the indicators are that financial strain is picking up pace.”Rebecca Oakes, Equifax Canada.And though overall delinquency levels are still below pre-pandemic levels, the underlying trend is going in the wrong direction.“There is still some positive news when it comes to missed payments as overall delinquency levels remain below what we saw pre-pandemic and some consumers are still weathering this difficult period well,” said Oakes, “Unfortunately for other consumers, the indicators are that financial strain is picking up pace.”
