TORONTO — Canadian credit card debt soared in the last three months of 2022 amid rising interest rates and stubbornly high inflation with younger Canadians in particular relying on credit to make ends meet.
"We haven't seen incomes rise to the extent of inflation," she said. "People are using credit ... to bridge the gap between income and expenses." Equifax said the effects of higher interest rates are yet to be fully felt by homeowners as many have not yet renewed their mortgages, but younger Canadians are feeling the pinch of inflation particularly hard.
While mortgage debt makes up three-quarters of all consumer debt, and the cost of that debt has been rising with interest rate hikes, consumers are struggling with non-mortgage debt such as credit cards, Equifax said. People without mortgages tend to be younger and/or have lower incomes and less savings, which is likely why they are struggling more with non-mortgage debt such as credit card debt, said Oakes.
Even as credit card payments slowed, credit card usage remained high, Equifax said, with more than 300,000 consumers using their card and carrying a balance on it. When Canadians are unable to pay more than the minimum payment on their cards or start missing payments while continuing to spend with credit, it can become a "vicious cycle," Campbell said.
In a press release, the Canadian Association of Insolvency and Restructuring Professionals said that financially vulnerable Canadians may turn to credit cards or lines of credit to bridge gaps in their budgets, putting them at further risk.