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PILE ON PLASTIC: Canadians are racking up big credit card debt

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As the Bank of Canada again moved aggressively in an attempt to bring inflation down by raising its benchmark interest rate on Wednesday, Canadians are loading up on their plastic.

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Credit card balances are skyrocketing as borrowing costs and the daily cost of everything remain at their highest level in 40 years.

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“Financial stress is becoming a reality for many more Canadians. Its impact on consumer credit is not only visible in everyday credit card spending, but also in other non-mortgage debt like car loans and lines of credit, where balances are on the rise.” , said Rebecca Oakes, Vice President. advanced analytics at Equifax Canada.

Credit card balances hit their highest level since the end of 2019.

According to Equifax, the biggest change in consumer credit balance is for those with lower credit scores, who may have a higher risk of missing payments.

“Credit card spending is at historically high levels,” Oakes added. “Strong consumer demand for credit cards means a competitive market for lenders. Consequently, the credit limits offered on the new cards are much higher than what we have seen in previous periods. »

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According to Equifax, the average credit limit on new cards is over $5,800 – the highest amount in seven years.

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The average amount spent monthly on a credit card was nearly $2,370 in the second quarter, up 22% from the same quarter in 2021.

From Jan. 1 to May 31, Canadians racked up about $10 billion more on credit cards held with chartered banks, bringing the total owed to at least $83 billion, Bank figures show. from Canada.

The rise stands in stark contrast to the general trend in 2020, when Canadians quickly paid off their credit cards while stuck at home and facing pandemic restrictions.

With most restrictions gone – and the economy and labor markets showing strength – demand continues to outstrip supply. Inflation stood at 7.6% in July.

Statistics Canada will release its next look at inflation in Canada on September 20. On Wednesday, the Bank of Canada raised its benchmark interest rate by 0.75% to 3.25%.

“Rapidly rising inflation and interest rates are clouding the economic outlook. Early indications from our data suggest financial stress is beginning to emerge,” Oakes said. “Canadians should continue to be mindful of their spending and their debts.”