Average Canadian credit card balance highest since 2007, with young adults hardest hit: Report

According to the latest consumer data from Equifax Canada, average credit card balances in Canada have surged to their highest level since 2007, with significant financial stress observed particularly among younger adults.

Despite stabilizing inflation and easing interest rates, improvements in credit cards, mortgages, and auto loans remain elusive, as indicated by Equifax’s second-quarter Market Pulse report. This stagnation is partly due to a worsening employment situation. Overall consumer debt reached $2.5 trillion in the quarter, marking a 4.2 percent increase from the previous year.

“Unfortunately, rising unemployment has offset some of the positives and is driving increased financial stress,” said Rebecca Oakes, Equifax Canada’s vice-president of advanced analytics. She noted that the effect of higher unemployment on credit data tends to be more pronounced.

“When inflation is high, we often see credit usage increase, with more money being put on credit cards, potentially reduced payment rates, and some delinquency,” Oakes explained. “If a consumer loses their job or is unemployed, they can’t make payments — which has a more immediate, significant impact on their credit situation.”

Spending Steady, Payments Declining

In the second quarter, average credit card balances exceeded $4,300, driving the total outstanding balances to $122 billion — a 13.7 percent increase from a year earlier. While consumer spending has remained stable, balances have risen due to fewer individuals paying off their full credit card amounts. Monthly payments have decreased across all age groups, with the most significant drop observed among those under 35.

“Hopefully, stabilizing inflation will help mitigate some of this,” Oakes said. “However, many younger consumers lack a financial buffer.”

Consumers aged 26 to 35 had the highest missed payment rate for credit products other than mortgages, at 1.99 percent, compared to an overall average of 1.4 percent. This figure is 23.4 percent higher than a year ago and the highest since 2011, according to Equifax. Delinquency rates for car loans and lines of credit within this age group were particularly high, reflecting the broader financial pressures they face.

Ongoing Housing Affordability Issues

The report also highlights persistent affordability challenges in Canada’s housing market. Credit card balances increased more for mortgage holders compared to others in the second quarter, while average mortgage loan amounts rose 6.1 percent from last year.

The proportion of first-time homebuyers continued to decline relative to pre-pandemic levels, and more buyers are opting for longer amortization terms. Equifax found that 15 percent of mortgage renewals in 2024 saw monthly payments rise by more than $300, roughly double the eight percent figure in 2019. This proportion was even higher in Ontario and British Columbia, at around 20 percent.

The report suggests that preliminary interest rate relief from the Bank of Canada has “not yet fully benefited consumers,” Oakes said. If rates decrease by a full percentage point, “we would expect to see some relief for businesses,” she added. However, the housing situation may remain challenging as individuals renewing mortgages now face rates that were unusually low during the COVID era. Consequently, any renewals in the upcoming year will likely involve some financial strain.

“I think it’s going to be quite a slow journey to see the impact of rate cuts fully materialize,” Oakes concluded.