A new reason to pay more than the minimum on credit balances

By Staff | February 23, 2017 | Last updated on February 23, 2017
2 min read

Many Canadians say they don’t have the funds to make RRSP or TFSA contributions. However, most Canadians have the funds for something else important to their financial well-being: paying more than the minimum amount on credit card balances.

And, while that kind of commitment helps pay off debt faster, it may also boost a client’s credit rating.

Read: 37% of boomers question if they have enough savings

Fully 88% of Canadians with credit cards “often” pay a greater amount than the minimum due, reveals a survey by TransUnion, a credit reporting company. (Only 7% of those polled weren’t cardholders.)

TransUnion research finds that the more consumers pay beyond the minimum, the less likely they are to be delinquent in their payments.

Read: Consumer debt and delinquency rates climb in Q3: Equifax

That may seem like a no-brainer, but TransUnion’s research is the first to quantify the finding.

It’s good information for clients to know if they hope to qualify for a mortgage or other loan, because the new research is expected to influence how lenders assess borrower risk.

“Even if [clients] can’t pay the full balance [on revolving debt], they may now find that lenders view them more positively depending on the amount they pay,” says Todd Skinner, president of TransUnion Canada, in a release.

That influence on lenders is sure to interest Canadians, who appear keenly aware of their credit histories. A Leger poll finds that 83% of Canadians discuss their credit histories with their partners at least twice a year. Indeed, fully 86% know their partners’ credit histories, though that figure drops to 78% for those with annual incomes less than $40,000.

One last finding from the TransUnion survey: 39% of Canadian cardholders don’t know why it’s important to pay more than their monthly minimum payments. If that’s your client, it’s probably time for a conversation beyond a potential boost to his credit rating.

The Leger poll was conducted online between February 6 to February 9, 2017, and included 1,569 Canadians.

TransUnion’s survey was conducted from December 7 to December 16, 2016, and based on a random sample of 1,010 Canadians age 16 and older.

See the full TransUnion survey here.

Also read:

OSFI warns lenders about mortgage complacency

Should investors use HELOCs?

Advisor.ca staff


The staff of Advisor.ca have been covering news for financial advisors since 1998.