Credit card debt stacking up for Albertans amid high inflation, increasing interest rates

A new report suggests Canadian credit card debt soared in the last three months of 2022 amid rising interest rates and high inflation, impacting Albertans.

The report from credit-monitoring agency Equifax indicates Canadians' credit card debt has increased by more than 15 per cent from the same period a year earlier, and totalled more than $100 billion for the first time.

Overall consumer debt rose in the fourth quarter of 2022, with total debt at $2.37 trillion, up more than six per cent from the same period in 2021,

The Office of the Superintendent of Bankruptcy found that Alberta recorded 1,161 consumer proposals for bankruptcy and 209 bankruptcies. That amounts to a 41.37 per cent increase year-over-year.

Calgarian Mary Clark, a veteran with the Canadian Armed Forces with more than a decade of service, says she been at the point of having to choose between paying rent and buying groceries.

"We were living off our credit card, we had to get groceries on the credit card and just recently in last six months I've been able to take care of my $50,000 credit card debt for food," she said.

"This is just for food and for fuel, the necessities. Just before Christmas, I finally got myself a winter coat and thank god for the foodbank."

Clark says better legislation is needed specifically for rent increases as she can’t afford a sudden $400 per month increase to support herself and her husband.

"We are a free country, a beautiful country, so please make it liveable for us, especially for those seniors who have spent their tax dollars here, they fought here and they contribute to the economy here."

It’s not just the aging population experiencing struggles.

University of Calgary students are also having a hard time applying for credit.

"It’s hard to find a credit card that will accept you," student Olivia Fulton said.

"It’s really difficult as a student, because I don’t have that kind of time to work, so I don’t have as much of an income currently and they’ll just decline you."

Rebecca Oakes, vice-president of advanced analytics at Equifax Canada, says that those who are able to get a line of credit are noticing their expenses increase.

"Compared to pre-pandemic numbers, the average spend on credit cards is about $400 higher than it was, and that’s continued into the fourth quarter of last year," she said. 

"I think right now, because inflation is high, interest rates are now high, we've seen that immediate effect on those consumers who are a little bit more on the edge, mostly younger and low income.

"I think these challenges are going to continue as we move through 2023, as interest rates are expected to stay where they are."

Oakes adds that debt will impact a wider volume of consumers who have their mortgages up for renewal, and this could lead to missed payments and lower credit scores.

The agency says that the average mortgage holder is paying $170 more monthly than they were before the pandemic, and expects this figure to rise further as more mortgages come up for renewal.

Equifax also pointed to Canada’s increase in population growth and the immigration of refugees increasing the need for credit cards and adding to unprecedented debt levels.

 Even as credit card payments slowed down, credit card usage remained high, with an increase of more than 300,000 consumers using their card and carrying a balance on it.

The fact that payments are coming down while balances rise is "an early warning sign," said Oakes.

Consumer proposals, meanwhile, were up 26.4 per cent from the previous year, though they were still below pre-pandemic levels -- with the exception of seniors.

Other debt products with variable rates, like home equity lines of credit, saw minimum monthly payments rise 24 per cent compared with pre-pandemic levels.

 'GET THE RIGHT ADVICE'

Laurie Campbell is a the director of client financial wellness at Bromwich+Smith, a team of licensed insolvency trustees and debt relief specialists

She says the number one thing consumers can do to prevent themselves from going in to debt is to plan ahead, live within their means, and be aware of the ongoing financial challenges that lie ahead.

"Number one is to sit down with your family, look at your whole financial situation, make sure you're all on the same tight page as far as budgeting, managing your money and try and get rid of debt," said Campbell.

"Number two, is get rid of high interest debt, we're talking about credit card debt they're sitting anywhere between 19 to 29.9% interest, it's crazy, and it's very hard to get out of large debt once you're in it because the interest eats up so much of the money that you're putting towards that debt."

Campbell also suggested working with a licensed insolvency trustee.

"Get the right advice, don’t go to some fly by night agency that says they’re going to improve your credit rating, because they can’t," she said.

"Make sure you are not paying anyone any money to not get the right advice."

With files from The Canadian Press