Canadian consumer debt is up but according to a recent report delinquency on unsecured debt is down to its lowest level in 6 years.
Data from the credit monitoring firm Equifax shows Canadian consumers owe $1.44 trillion in the second quarter of 2014, up from $1.42 trillion in the first quarter. The average debt Canadians owe, excluding mortgages, is just over $20K.
For the last 4 years the Bank of Canada has kept the interest rate steady at 1% but warned consumers about the dangers of taking on too much debt when the rates eventually rise. The low interest rates have propelled consumer spending to the level of indebtedness that exists today. As of yesterday, the Bank of Canada has remained neutral with their threat of increasing the interest rate.
So consumers can breathe easy for the time being and continue to manage their bills by paying only minimum payments. Living pay cheque to pay cheque to pay bills and using credit for making purchases has become the norm in our “nearly cashless” country. Canada has the infrastructure for making cashless purchases through credit cards, debit cards, retail cards and other mobile friendly options. All this makes it easier for consumers to spend faster than they earn.
For more on how Canada has become a nearly cashless country, go to our blog article, “Canadians prefer using credit over cash”.
As a result of being a nearly cashless country, the credit card sector rose 4.4 per cent in Canada. Demand for new credit is up and credit card companies and creditors associated with them are cashing in.
Statistics have shown the delinquency debt rate, which tracks bills overdue by 90 days or more, fell by 2.8 per cent. Consumer bankruptcies were down 5 per cent compared to the previous year report.
Could this mean that more consumers are resolving their own debts through the assistance of debt relief firms? Through professional negotiation, consumers are able to tailor a more affordable debt repayment and in some cases at no interest. This process empowers consumers to manage their debt in a timely manner and enables consumers to avoid bankruptcy….and becoming another debt delinquency statistic
One thing is for certain, if consumer debt continues to climb we will see a vast number of indebted consumers looking for help managing debt when the Bank of Canada finally increases interest rates. Will that happen before the end of 2014? Anything is possible, so we’d better get prepared..
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