How much debt does the average Canadian carry?
According to a new report by Equifax, Canadian consumer debt has risen to $2.32 trillion, with an average debt load of approximately $21,000—excluding mortgages. These numbers represent an increase of 8.2% over last year, and 6.4% between the first and second quarters of 2022. And Canadians are using credit cards more, as there was a 6.4% increase in credit balances from the first quarter to the second.
This news, though unwelcome, is not unexpected according to some experts. Anne Arbour is the director of strategic partnerships at the Credit Counselling Society, an accredited non-profit charity that helps Canadians solve their money problems.
“When you combine the way the current pace of inflation is affecting everyday needs like food and gas, coupled with the impact of our post-pandemic spending on things like travel and entertainment, it is not surprising to see these numbers,” she says, adding that BoC interest rate hikes are compounding the issue.
“Recent jumps in interest rates are also affecting the disposable income of any consumer with a variable-rate loan or mortgage or line of credit, so it also makes sense that they might turn to using even more credit to help bridge the gap in their resources.”
According to consumer insolvency firm MNP Ltd, 59% of us are feeling the effects of these rate increases, and with an estimated two million Canadians renewing their mortgages within the next 12 months, more people are likely to feel the pinch.
“Credit card spending is reaching historically high levels,” stated Rebecca Oakes, vice president of advanced analytics at Equifax Canada, in a press release. “High consumer demand for credit cards means a competitive marketplace for lenders. As a result, the credit limits being offered on new cards are much higher than we’ve seen in previous periods.”
How long should it take to pay off credit card debt?
The answer depends largely on your own personal circumstances. How much can you afford to pay off monthly?
“What’s important for anyone to know,” says Arbour, “is their monthly capacity to make payments.”