Supported by heftier bank balances following pandemic lockdowns, Canadians gave their credit cards a workout in the first quarter of the year, recent data shows. However, rising inflation and interest rates represent a growing financial concern for households.
The average monthly spend per consumer credit card climbed by 17.5% in the first quarter of this year compared to the same period last year, Equifax Canada said in a release on Thursday.
Ontario saw the biggest increase in credit card spending (up by 20.4%), followed by Quebec (18.4%). By generation, gen Z and millennials drove consumer spending the most.
“Pent-up demand and increased travel with the easing of Covid restrictions, combined with soaring inflation, have led to some of the highest increases in credit card spending we’ve ever seen,” said Rebecca Oakes, vice-president of advanced analytics with Equifax Canada, in the release. “Unfortunately for consumers, this is also at a time when the Bank of Canada is raising interest rates.”
Further, with gas and food prices increasing at a higher rate than overall inflation, “it’s very important for consumers to revisit their budget allocations,” Oakes said.
Based on first-quarter data from TransUnion, 56% of Canadian consumers said they were very concerned about the inflation rate and associated impacts, and 54% said they weren’t as optimistic about their household finances over the next 12 months as they were in the first quarter.
Credit card balances were up by 9.5% year over year in the first quarter, though balances had yet to reach pre-pandemic levels, the Equifax release said.
Still, increased credit card spending could lead to increased consumer stress in coming months. Equifax said it expects a steady rise in the delinquency rate through the year’s end, given early signs of stress among younger consumers.
Overall, the non-mortgage 90+ day delinquency rate increased by a slight 0.88% in Q1, up 2.1% from the previous quarter. In comparison, in the under-25 and 25–34 age groups, the delinquency rate increased by about 21% and 5%, respectively, from the previous quarter.
Average consumer debt was $20,744, an increase of 1.5% when compared to Q1 2021. This represented the first year-over-year increase since 2019, the release said.