Canadian consumer debt drops for first time in a decade after people stop using their credit cards


With stores and restaurants closed in March, consumers reduced credit card use, and the trend continued in April

Content of the article

According to Equifax Canada, a sharp drop in credit card use at the end of March led to the first drop in consumer debt balances in more than a decade.

Content of the article

Average non-mortgage debt balances fell 0.5% to $23,386 ($17,200) in the first quarter from a year earlier, the nation’s largest credit reporting firm said on Tuesday. With stores and restaurants closed in March due to the coronavirus, consumers reduced credit card use, leading to lower balances.

The trend accelerated in April, “with little sign that consumers are looking to take on debt for help in the early days of the pandemic,” said Bill Johnston, vice president of data and analytics. analysis at Equifax, in a press release.

  1. More than one million Canadians believe they are about to declare bankruptcy, according to the findings of a new poll released Thursday.

    More than a million Canadians believe they are on the brink of bankruptcy, new poll finds

  2. The Canadian Imperial Bank of Commerce announced Friday that it is reducing interest rates on personal credit cards.

    Major Canadian banks cut credit card rates to provide relief to customers during COVID-19 pandemic

  3. Canada's problem and solution are one: Debt got us into trouble, now debt must get us out.

    Indebted country: Canada borrowed itself in a difficult situation, it must now borrow its way out of the coronavirus crisis

Content of the article

Massive injections of cash from the federal government and the Bank of Canada, as well as deferrals of mortgages and other loans appear to be helping consumers avoid trouble, for now. Consumer insolvencies plunged to their lowest since 2007 in April, the country’s bankruptcy office said this month. And household debt-service ratios, a key measure of financial stress, fell in the first quarter, Statistics Canada said last week.

Equifax said the biggest decrease in debt burden was among the youngest cohort. Average non-mortgage debt balances for 18- to 25-year-olds fell 1% to $8,588, the data showed.

Delinquency rates hit 1.22% in the first quarter, which Johnston said was not an accurate reflection of COVID-19. “The combination of payment deferrals and government supports has minimized the impact on delinquencies, at least in the initial phases,” he said by email. Late payments “will in all likelihood increase sharply”.


Comments are closed.