Credit card use is exploding

The incessant waltz of Visa and Mastercard cards in stores now has the air of frenzied hip-hop. Average credit card spend is now $2,370 per month, up from $427 in just one year. It’s a historic high. With the obvious consequence that the number of stressed and breathless consumers is increasing.

Posted at 6:30am

The days when we could keep our spending to a minimum and let our debt melt away seem a long way off. Very far. Normal life has resumed, with all that entails in terms of shopping… amid rising inflation.

As a result, our credit card statements are showing sharply rising amounts, new data from Equifax confirms. at In the second quarter (April, May, June), the average monthly spend of $2,370 represents an increase of 22% (or $427). It’s enormous. Has your salary followed the same curve over the past year?

To give you an idea, five years ago the average Canadian was spending $1850 a month. Over a year, it’s $6,240 less than it is currently.

The number of credit cards we use has also increased by 16% over the past year, according to Equifax. Consumers clearly need additional credit to meet the rising cost of living. Additionally, the average limit for new cards is over $5,800, which hasn’t been seen in seven years. This is due to higher salaries and increased demands, explains Jean-Philippe Saumure, Senior Advisor, Data and Analytics at Equifax. “Issuers know very well that users will use this credit. »

Rising car prices are also putting pressure on consumers to borrow more to drive. Within a year, the loan amount from merchants increased by 5% and from banks by 10%. Due to the lack of stocks, however, the number of loans fell. But for those who recently acquired a vehicle, it’s an added burden.

Debt in Montreal

In the end, Quebecers have an average consumer debt (excluding mortgages) of $18,429. (+2.8%) The national average is $21,128 (+2.4%). Interestingly, Montreal has the lowest debt among Canada’s nine largest cities at $16,422 (+4.6%). Historically, Quebec has always excelled in this regard. “But Quebec’s debt is increasing, as it is everywhere in Canada,” adds Jean-Philippe Saumure. In addition, all the trends observed elsewhere in the country are also affecting the poutine sector.

The most worrying of these trends is the rise in bankruptcies. Equifax notes that 100,000 more consumers missed a loan payment in the second quarter than a year earlier. More specifically, one in 30 people in the country was unable to pay off a debt when it was due.

“In the current context of inflation and rising interest rates, this is certainly a sign of financial stress for consumers,” says Jean-Philippe Saumure. We are still a long way from the default rates before the pandemic (around one in 20 people was unable to pay their contributions in 2018 and 2019), but we are queuing up to catch up “within a few quarters”, the expert calculates.

For Pierre-Emmanuel Paradis, economist and president of the company AppEco, “the boat is starting to take water”, and this is not surprising. In the last two years, “people have been buying houses that were a little overpriced and didn’t necessarily lend themselves to the possibility of rapidly rising interest rates,” he explains. In addition, inflation has set in, making it harder to cut spending.

While the rise in mortgage interest rates is straining the budgets of some households, others are having to cope with rent increases, some of which are substantial.

Returning to the office in person also comes with its share of hard-to-avoid costs: transportation, new clothes, meals with co-workers. Not to mention that after two years of confinement, the past few months have fueled a desire (and even mental health need) to enjoy life, as evidenced by the wanderlust.

After practicing good financial habits to a greater or lesser extent, even the best resolutions are put to the test.

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