Ideas to limit spending as inflation rises: Personal finance expert
Canadian households are piling on credit card debt at a faster pace, according to data released by Statistics Canada on Wednesday.
Credit card debt issued by chartered banks climbed 1.45 per cent to $1.3 billion in February, marking an acceleration for a third consecutive month, the data showed. Non-mortgage loan debt also rose 0.4 per cent to $2.8 billion for the month, the figures showed.
On a yearly basis, consumer debt in February grew 14.5 per cent while balances on home equity loans remained at $170.5 billion, the report revealed.
“Persistently high interest rates and inflation are likely to continue to put a financial strain on households as they continue to access credit to fund their spending, especially for more vulnerable groups,” the report said.
Overall, household spending for both goods and services climbed in the first quarter of 2023, according to the data.
The figures showed Canadians are spending more on travel with expenditures from abroad rising 6.8 per cent in the first quarter of 2023. Dinning was also up 4.4 per cent in the quarter as was a rise in spending on alcoholic beverages, up 6.5 per cent.
The uptick in spending comes after minimal growth in the previous two quarters, the report said.
One positive aspect throughout the debt picture is the forecasted resilience of the Canadian consumer, a survey from TransUnion revealed on Wednesday.
TransUnion’s data verified that credit card usage has surged by 20 per cent year-over-year as of the fourth quarter of 2022. Total outstanding balances rose 5.6 per cent to a record $2.32 trillion throughout all of Canada, the survey showed.
There has also been a rise in new credit cards issued, which is being driven primarily by a demand from Gen Z (6.2 per cent) and the rise in newcomers to Canada (85 per cent), the data revealed.
Despite the challenging economic environment facing Canadians, the report said it expects the consumer to persevere.
“We anticipate the next 12 months to be characterized by a ‘continued resiliency meets financial fragility’ mindset,” it said.
It cited an eventual moderation in the interest rate environment and a strong labour market as top reasons why Canadians should be able service their higher debt levels.