Staggering number of Canadians are missing credit card payments
Amid soaring living costs, a growing unemployment rate, and economic uncertainty in Canada, more people have fallen behind on credit card payments this year.
According to the latest report by Equifax Canada, 1.4 million people in Canada missed at least one credit payment in the first quarter, a level not seen since 2009.
“Our data shows card payment levels, especially for younger consumers, are starting to fall, indicating this spending slowdown is likely driven more by consumers trying to be prudent rather than switching from credit to debit for financing,” said Rebecca Oakes, vice president of advanced analytics at Equifax Canada.
On average, Canadians had $21,859 in non-mortgage debt in the first quarter, primarily due to auto loans, as buyers sought to lock in purchases before anticipated price hikes. People have also been more prudent with their spending — the average Canadian’s monthly credit card spend dropped by $107, the lowest since March 2022.
“Despite a slowdown in demand for non-mortgage debt, overall balances remained fairly flat, an indication that consumer payment levels may be falling,” said Oakes.
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Despite Canadians’ efforts to control their spending, many are still missing credit card payments.
The number of Canadians paying their credit card dropped to 52.9 per cent (down 32 basis points, or 0.32 per cent). The situation is worse for those under the age of 35, with the average pay rate dropping from 62.9 per cent to 58.9 per cent — a 392-basis-point decrease. There was also a 25-basis-point increase in the number of young Canadians making only the minimum payments on their credit cards.
“Consumer-level delinquency rates among non-mortgage holders rose 8.9 per cent year-over-year, compared to 6.5 per cent for mortgage holders,” reads the report. “Younger Canadians were hit hardest, with the 18 to 25 age group experiencing a 15.1 per cent increase in delinquency rates.”
Ontario remains “a hotspot for financial stress in Canada.” The number of Ontarians who missed credit card payments rose by 24 per cent. Albertans closely followed, experiencing a nearly 16 per cent increase in delinquency rates.
“We’re observing positive shifts in consumer behaviour, with reduced credit card usage and early signs of delinquency stabilization for some consumers,” explained Oakes. “However, headwinds will likely persist, such as rising unemployment and rising food prices, in already strained regions.”