More and more Canadians are only paying the minimum amount due on their monthly credit card bill in response to the increasing cost-of-living crisis, according to a new report.
A TransUnion report published on Tuesday revealed that many Canadians are facing ever-increasing interest rates as they can only afford to make their minimum monthly credit card payments.
The report found that the number of Canadians in that situation rose by eight basis points, to 1.3% in the first quarter, compared to that of last year.
“Inflationary pressures may lead consumers to turn to bank cards or personal loans to help make ends meet, and Millennials and Gen Z consumers are no exception,” said Matthew Fabian, director of financial services research and consulting at TransUnion Canada.
According to the report, outstanding credit card balances in the first quarter amongst the Gen Z cohort spiked by 30%, compared to the previous year.
However, millennials still hold the largest portion of the country’s debt, accounting for 38% of all debt.
This is likely due to their stage in life as many of them are buying houses and having children, as well as taking out auto loans.
“Given the higher payments that many consumers now face on their mortgages, some consumers are making lower payments on other non-mortgage obligations, including credit cards, where consumers can pay less than their full outstanding balance each month,” reads the study.
Outside of age-range, the cost-of-living crisis varies by province, with Alberta beating out all other provinces in the first quarter with the highest consumer-level delinquency increase at 2.21%.
A consumer delinquency is defined as a credit card debt that is 30 days or more past due.
Alberta was followed by New Brunswick at 2.16% and Manitoba at 2.11%.
Ontario’s consumer-delinquency rate was at 1.82%, although the province saw the highest overall increase in serious consumer delinquencies with an increase of 26 basis points.
“Despite these rising delinquency levels, Canada’s commodity-producing provinces remain best positioned to weather growth headwinds,” said Fabian.
“These regions generally experience more volatile economic conditions, given their additional dependency on commodity prices and seasonality. Cost of living increases are not uniform and impact regions differently across Canada. While we see delinquency rates rise faster in some areas, future economic growth and lower interest rates are expected to offset this in the long run.”
Canada’s total consumer debt was $2.38 trillion in the first quarter, up from $2.32 trillion over that same period in 2023 and down slightly from last year’s fourth quarter, where it hit a record 2.4 trillion.
“We have observed that when consumers are faced with mortgage payment shock, the impact on credit card delinquency is two to three times that of mortgage delinquency,” said Fabian.
“Non-mortgage debt held by homeowners is now well above 2019 levels, with at least 50% of outstanding mortgages yet to be repriced.”
