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Credit card usage is exploding

The incessant waltz of Visa and Mastercard in stores now has the air of frantic hip-hop. Average credit card spending is now $2,370 per month, an increase of $427 in just one year. It is an all-time high. With the obvious consequence that the number of stressed and out of breath consumers is on the rise.

Posted at 6:30 am

The days when our expenses were kept to a minimum and we could melt our debt levels seem long gone. Very far. Normal life has resumed, with all that this entails in terms of purchases… in the midst of galloping inflation.

Therefore, our credit card statements show sharply increasing amounts, new data compiled by Equifax confirms. A second quarter (April, May, June), the average monthly spend of $2,370 corresponds to an increase of 22% (or $427). It’s huge. Has your salary followed the same curve in the last year?

To give you an idea, five years ago the average Canadian spent $1,850 a month. For one year, it is $6,240 less than today.

The number of credit cards we use is also up sharply, up 16% from last year, according to Equifax. Consumers clearly need additional credit to cover the increased cost of living. In addition, the average limit for new cards exceeds $5,800, which has not been seen for seven years. This is due to higher wages and greater needs, explains Jean-Philippe Saumure, principal adviser for data and analytics at Equifax. “The issuers know very well that the users are going to use this credit. »

Rising car prices are also putting pressure on consumers to borrow more to drive. In one year, the number of loans increased by 5% at dealerships and 10% at banks. However, due to lack of inventory, the number of loans decreased. But for those who have recently purchased a vehicle, it is an additional burden.

Debt in Montreal

In the end, Quebecers end up with an average consumer debt (excluding mortgages) of $18,429. (+2.8%) The national average is $21,128 (+2.4%). It is interesting to note that among the nine largest cities in Canada, Montreal has the lowest level of debt, with $16,422 (+4.6%). Historically, Quebec has always stood out in this regard. “But indebtedness in Quebec is increasing like everywhere else in Canada,” says Jean-Philippe Saumure. In addition, all the trends seen in other parts of the country also affect the poutine realm.

Of these trends, the most worrying is the rise in insolvencies. During the second quarter, 100,000 more consumers missed a credit payment than last year, Equifax notes. More specifically, one in 30 people in the country has not been able to pay one of their debts on the due date.

“It is certainly a sign, in the current context, with inflation and rising interest rates, of financial stress for consumers,” says Jean-Philippe Saumure. We are still far from the delinquency rates prior to the pandemic (around one in 20 people could not pay their installments in 2018 and 2019), but we are queuing to recover them “within a few quarters”, calculates the expert.

For Pierre-Emmanuel Paradis, economist and president of the firm AppEco, “the ship is beginning to leak” and that is not surprising. In the last two years, “people have been buying houses that are too expensive and not necessarily adequate for the possibility of rates going up quickly,” he explains. In addition, inflation has skyrocketed, making it more difficult to cut spending.

While rising mortgage rates hurt some households’ budgets, others have to deal with a sometimes substantial increase in rent.

Returning to the office in person also brings its share of hard-to-avoid expenses: transportation, new clothes, meals with colleagues. Not to mention that after two years marked by restrictions, the last few months have brought out the desire (and even the need for mental health) to enjoy life, as evidenced by the madness to travel.

After practicing good financial habits, with more or less force, now even the best resolutions face the test of reality.

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