In the face of sky-high inflation, Atlantic Canadians are taking on more credit card debt. According to a new study from Equifax Canada, consumers in the four Atlantic provinces are carrying an average of $1,651 in credit card debt. That’s up nearly nine percent compared to last year.
This is on par with the rest of Canada. Nationwide, credit card balances were up 9.5 percent in the first quarter of 2022 compared to the same time last year. And they’re up 2.4 percent fin just last quarter.
The average Canadian consumer now carries $20,744 in debt (excluding mortgages), an increase of 1.5 percent from 2021.
“It is the first year-over-year increase since 2019,” reads the Equifax report.
Rebecca Oates, vice-president of advanced analytics at Equifax Canada, says several factors have gone into these tough financial times for Atlantic Canadians.
“I think it’s a perfect storm with what happened to Covid. Beginning last year, we were seeing consumers increase their confidence; they were going back out, they were spending, booking vacations,” says Oates.
“Inflation is so high right now and day-by-day costs are really going up and everyone is feeling the pinch.”
Halifax was the only major city in Atlantic Canada that was studied individually. Overall consumer debt, not including mortgages, is down 1.68 percent in the city. That is the biggest decrease among the cities surveyed. Montreal and Toronto saw overall consumer debt increase dramatically, by 5 percent and 4.65 percent, respectively.
However, most people across Canada are still trending in the wrong direction with debt, especially with credit cards.
Technically, credit card debt is slightly lower than it was pre-pandemic. That may sound good, but at the height of Covid-19 lockdowns, Canadians were spending very little money and taking on 10 percent less credit card debt compared to 2019. So to see the 10 percent gap close in just one year is an alarming trend.
On top of that, these first-quarter numbers are historically unseasonal. The first quarter of the year is typically a time when people are spending less and paying off their credit cards after the holiday season. Instead, credit card usage is increasing, suggesting people are taking on debt just to get by.
“What happens in January-February-March, the balances really fall off; spending is reduced, payments are up and the balances come back down. That hasn’t happened,” noted Oates.
“It’s definitely a real shift in terms of the trend.”
To add more pressure on debt carriers, the Bank of Canada has raised interest rates to try and curb inflation. While this may reduce people’s spending, it doesn’t help those who are relying heavily on their credit cards.
Oates suggested higher interest rates could lead to more people being delinquent on their credit card payments.
“They’re trying to encourage people to save, not spend, but the realities right now, a big reason why things are costing more is because of supply chain issues and what’s happening in parts of the world globally. So, I don’t think there’s going to be a quick fix,” predicts Oates.
“If we go back to 2017-18 where we saw interest rates rise, it was exactly what happened back then, and then delinquency happened down the line.”
Oates suggests that consumers may want to examine how their debt is managed. People should know if the type of loan they have is vulnerable to interest rate increases.
“If you have most of your debt in a product which is very sensitive, you might want to think what happens if it goes up another 1-2 %, can you still make those payments? If not, what alternatives are available?”
Derek Montague is a reporter with Huddle, an Acadia Broadcasting content partner.
