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  • Writer's pictureJose Gustavo Salcedo

More Canadians Only Making Minimum Payments on Credit Cards: TransUnion

More Canadians Only Making Minimum Payments on Credit Cards

A new report reveals a growing number of Canadians are struggling with rising credit card balances due to the cost-of-living crisis and higher interest rates, according to TransUnion.

Key Findings

  • Increase in Minimum Payments: The number of Canadians paying only the minimum monthly amount on their credit cards rose to 1.3% in the first quarter, up by eight basis points from last year.

  • Household Incomes Not Keeping Pace: Matthew Fabian, director of financial services research at TransUnion Canada, explained that many household incomes are not keeping up with inflation and higher interest rates. This has forced many to rely more on credit cards.

  • Higher Delinquency Rates: Those with mortgages are experiencing higher delinquency rates on credit cards compared to those without mortgages. This is because some consumers are prioritizing their mortgage payments over credit card payments, and in some cases, missing their credit card payments entirely.

Total Consumer Debt and Credit Usag

  • Total Debt: Total consumer debt in Canada reached $2.38 trillion in the first quarter of this year, slightly down from a record $2.4 trillion in the previous quarter but up from $2.32 trillion in the same period last year.

  • Credit Product Holders: 31.8 million Canadians had one or more credit products in the first quarter, a 3.75% increase from the previous year. This growth was mainly driven by newcomers and Generation Z.

  • Generation Z: There was a notable 30% increase in outstanding credit card balances among Gen Z compared to the previous year. This generation is new to credit and still learning to manage their financial obligations.

  • Millennials: Millennials held the largest portion of debt in Canada, about 38%, due to their higher credit needs for things like housing and auto loans. Ten years ago, their debt structure mainly involved credit cards and car loans.

Mortgage Payments and Financial Resilience

  • Mortgage Prioritization: Despite concerns about missed payments, Fabian reassures that households are less likely to fall behind on their mortgage payments due to strict qualification processes. Typically, consumers prioritize paying their mortgages over other credit products.

  • Consumer Resilience: Despite the challenges, Canadian consumers have shown resilience. The rapid growth in credit participation, especially among Gen Z, indicates a robust consumer base.

Future Outlook

Fabian expects that anticipated interest rate cuts, possibly starting as early as June, will help alleviate some of the financial pressures on households. He remains optimistic that the market will gradually return to normal.

Adapted by Jose Gustavo

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