Credit Card Debt

Average Credit Card Debt in Canada & Other Credit Stats You Need to Know

Credit card debt is common. Read more to find out the average credit card debt in Canada & what percentage of Canadians are struggling with this.
Caitlin Carter
September 28, 2023
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Table of Contents

Credit card debt is a prevalent financial concern in many countries, including Canada. Understanding the extent of credit card debt in the Canadian population is crucial for assessing the overall financial well-being of individuals and identifying potential areas for improvement. This article aims to shed light on the percentage of Canadians who have credit card debt, as well as the factors contributing to this debt and its consequences. By exploring strategies to manage and reduce credit card debt, individuals can take proactive steps towards improving their financial situation and achieving long-term financial stability. So, let's delve into the details and uncover the credit card debt landscape in Canada.

Key takeaways:

  • A significant percentage of Canadians have credit card debt, which can lead to financial stress and hinder wealth building.
  • Factors such as lack of financial literacy, high cost of living, job insecurity, and unexpected expenses contribute to the accumulation of credit card debt in Canada.
  • Implementing strategies like budgeting, debt consolidation, snowball method, and utilizing balance transfer offers can help Canadians effectively manage their personal finances and reduce their credit card debt.

Some Facts About Average Credit Card Debt in Canada

➡️ Canada’s consumer debt has reached a total of $2.4 trillion (Source: Equifax)

➡️ The average credit card debt in Canada is about $4,200 (Source: Transunion)

➡️ 43% of Canadians currently have credit card debt. (Source: Nerdwallet)

➡️ 40% of Canadians with credit card debt believe it will take six months or longer to pay it off. (Source: Nerdwallet)

➡️ Only 58% of Canadians with credit cards always pay off their balances in full each month. (Source: Nerdwallet)

➡️ 70% of Canadian adults have used credit cards to pay for essential purchases in the past year. (Source: Nerdwallet)

➡️ Millennials were more likely than other generations to change their credit card habits due to increased rent and mortgage payments. (Source: Nerdwallet)

What is Credit Card Debt?

Credit card debt refers to the amount of money that individuals owe to credit card companies for their outstanding balances. It is a result of borrowing funds through credit cards and failing to pay off the full balance by the due date. This debt accumulates with interest and fees, becoming a financial burden for many people. Credit card debt can have a negative impact on credit scores and financial well-being. It is crucial to manage credit card spending habits responsibly and pay off balances in a timely manner to avoid falling into the cycle of debt.

Overview of Credit Card Debt in Canada

Credit card debt is a pressing concern for many Canadians. In this overview, we'll dive into the world of credit card usage in Canada, uncovering the percentage of Canadians grappling with credit card debt, the average credit card debt in Canada, and how it varies among the provinces. Prepare to discover eye-opening insights into the financial landscape of our neighbours up north and gain a better understanding of this widespread issue. Let's explore the numbers and delve into the trends that shape credit card debt in Canada.

Understanding Credit Card Usage in Canada

Understanding credit card usage in Canada is crucial in order for individuals to effectively manage their personal finances. It is important to consider several key factors including the prevalence of credit card usage, the average credit card debt, and the reasons behind credit card debt in the country.

Recent studies reveal that approximately 83% of Canadians possess at least one credit card, with an average credit card debt amounting to around $4,200. 

Contributing to this debt are factors such as the high cost of living, limited financial literacy, and unexpected expenses. By comprehending these factors, individuals can make informed choices regarding their credit card usage, thus avoiding unnecessary debt.

Percentage of Canadians with Credit Card Debt

According to recent data, the percentage of Canadians with credit card debt varies among provinces. Here is an overview of the percentage of Canadians with credit card debt in each province:

It is evident that a significant percentage of Canadians have credit card debt, demonstrating the prevalence of this issue. Such debt can lead to serious consequences. To effectively manage and reduce credit card debt, various strategies can be employed, including budgeting and financial planning, debt consolidation, utilizing the snowball method, or taking advantage of balance transfer offers. By taking proactive steps to address credit card debt, individuals can regain control over their finances and work towards achieving financial freedom.

Comparison of Credit Card Debt among Provinces

A comparison of credit card debt among provinces in Canada can provide insights into regional variations in financial habits and circumstances. The table below displays the average credit card debt for each province:

Average Credit Card Debt By Province 

It is important to note that these figures are approximate and can vary depending on various factors such as the size of the population, cost of living, and economic conditions. Understanding these differences can help policymakers and individuals develop targeted strategies to manage and reduce credit card debt in their respective provinces.

Did you know? Canadians are also using other forms of credit and debt. According to Equifax Canada Market Pulse Quarterly Credit Trends from Q2 of 2023, the average non-mortgage debt per credit active consumer has been rising slowly, currently coming in at approximately $21,131.

Factors Contributing to Credit Card Debt

From a lack of financial literacy to the high cost of living, job insecurity, and unexpected expenses, these subsections will shed light on the various factors that play a role in the accumulation of credit card debt among Canadians. Discover the reasons behind this financial burden and gain insights into the challenges faced by individuals in managing their finances.

Lack of Financial Literacy

Lack of financial literacy is a significant determinant leading to credit card debt in Canada. A sizable number of Canadians lack the necessary comprehension and understanding of personal finance, such as budgeting, saving, and managing debt. 

Without this knowledge, individuals may engage in dangerous spending habits like overspending, making impulsive purchases, or failing to grasp the consequences of carrying a balance on their credit cards. It is indispensable for Canadians to have access to financial education and resources to enable them to make informed financial decisions and prevent the accumulation of debt.

High Cost of Living

The high cost of living is a significant factor contributing to credit card debt in Canada. Given the ever-increasing expenses associated with housing, education, healthcare, and everyday needs, many Canadians turn to credit cards in order to make ends meet. The exorbitant cost of living places immense pressure on both individuals and families, compelling them to stretch their budgets and consequently resort to credit card usage, resulting in accumulating debt. 

This, in turn, leads to financial stress, difficulties in obtaining loans, and a hindrance in building wealth. To effectively manage and decrease credit card debt, it is crucial for Canadians to prioritize budgeting, engage in financial planning, and explore debt consolidation options, all aimed at alleviating the burden imposed by the high cost of living.

Job Insecurity

Job insecurity is a prominent factor that contributes to credit card debt among Canadians. The uncertainty regarding future employment and income often compels individuals to rely on credit cards to meet their living expenses. This dependence on credit can quickly accumulate debt, especially in cases of job loss. 

To effectively handle job insecurity and decrease credit card debt, individuals should prioritize building emergency savings, enhancing their employability through additional skills or education, and creating a comprehensive budget to closely monitor expenses. Seeking financial advice or counselling can also offer valuable guidance on managing debt during periods of job insecurity. 

Unexpected Expenses

Unexpected expenses can often contribute to credit card debt, catch individuals off guard, and increase their financial burden. It is essential to be prepared for these unforeseen costs and have a plan in place to manage them. Here are some suggestions to help navigate unexpected expenses:

  • Establish an emergency fund to cover unexpected costs, such as medical bills or car repairs.
  • Create a monthly budget that includes a category for unexpected expenses. Allocate a portion of your income to this category to cover any surprises that may arise.
  • Ensure you have appropriate insurance coverage to protect against unexpected expenses, such as health insurance or home insurance.
  • Set aside a portion of your income for savings to build a financial safety net and be better equipped to handle unexpected expenses.
  • If you find yourself facing large unexpected expenses, explore options for financial assistance, such as low-interest loans or payment plans.
  • By having a proactive approach to managing unexpected expenses, you can minimize the impact on your finances and avoid falling into excessive credit card debt. Remember to regularly review and update your financial plan to adapt to changing circumstances.

Consequences of Credit Card Debt

Credit card debt can have serious consequences, causing financial stress, impacting credit scores, and making it difficult to obtain loans or mortgages. It can even lead to a stagnation of wealth building. These repercussions highlight the importance of understanding the implications of carrying debt on our plastic companions. Let's explore the various ways that credit card debt can affect our lives and financial well-being.

Financial Stress

Excessive credit card debt can cause financial stress. It can lead to feelings of anxiety, result in sleepless nights, and put a strain on relationships. The burden of high-interest rates and the need to make regular debt payments can make it difficult to cover necessary expenses and save for the future. In more severe cases, financial stress caused by credit card debt can even contribute to mental health issues such as depression and anxiety. It is crucial to promptly address credit card debt, seek assistance if necessary, and implement strategies like budgeting and debt consolidation to relieve financial stress and regain control over one's finances.

Impact on Credit Score

The impact on credit scores caused by credit card debt is considerably significant and should be given careful consideration when managing personal finances. There are several ways in which credit card debt can affect credit scores:

  • Payment history: Making late or missed credit card payments can have a significant negative effect on credit scores.
  • Credit utilization: Having high credit card balances in relation to credit limits can adversely impact credit scores.
  • Length of credit history: Carrying credit card debt for an extended period of time can result in a decrease in credit scores.
  • New credit applications: Applying for new credit cards while carrying high levels of debt can lead to lower credit scores.
  • Credit mix: Maintaining a healthy mix of credit accounts, including credit cards, can have a positive impact on credit scores.

Difficulty in Obtaining Loans or Mortgages

Obtaining loans or mortgages can be challenging for individuals who face difficulty in managing their credit card debt, as it can have a significant impact on their creditworthiness and debt-to-income ratio. When borrowers have high levels of credit card debt, it signals to lenders that they may struggle with their financial management, which increases the risk of defaulting on loan repayments. As a result, lenders may impose higher interest rates, stricter loan terms, or even deny loan or mortgage applications altogether. I know someone personally who experienced this situation. They had a hard time getting approved for a mortgage due to their substantial credit card debt. Consequently, they had to focus on reducing their debt before becoming eligible for a more favourable loan offer.

Stagnation of Wealth Building

The stagnation of wealth building is a direct consequence of credit card debt that hampers individuals' ability to accumulate savings and assets. This can impact long-term financial stability and wellness as households struggle with:

  • High interest rates: One factor contributing to the stagnation of wealth building is the burden of paying off credit card debt with high interest rates, which leaves little room to save and invest.
  • Minimum payments: The focus on minimum payments, which prolongs the debt repayment process and limits the funds available for building wealth.
  • Missed investment opportunities: The money spent on interest payments could have been used for investments that generate long-term wealth.
  • Damaged credit score: Furthermore, a poor credit score resulting from credit card debt can hinder access to favourable loan terms for wealth-building efforts such as purchasing a home or starting a business.

Strategies to Manage and Reduce Credit Card Debt

Are you struggling with credit card debt? Don't worry, in this section, we'll discuss some powerful strategies to help you manage and reduce that burden. From smart budgeting and financial planning to effective debt consolidation methods, we've got you covered. We'll also explore the snowball method and how you can utilize balance transfer offers to regain control of your finances. So, if you're ready to tackle your credit card debt head-on, keep reading to discover these game-changing strategies.

Budgeting and Financial Planning

Implementing budgeting and financial planning is essential to effectively manage and reduce credit card debt. Follow these key steps:

  • Step 1: Evaluate your income and expenses to create a realistic budget.
  • Step 2:  Prioritize debt payments and allocate a specific amount each month.
  • Step 3: Track your spending habits and pinpoint areas where you can cut back.
  • Step 4: Consider using cash or debit cards instead of credit cards for day-to-day expenses.
  • Step 5: Establish an emergency fund that can cover unexpected expenses.
  • Step 6: Create goals and set a timeline to pay off your credit card debt.
  • Step 7: If necessary, seek professional help such as financial counselling.

Debt Consolidation

Debt consolidation is a financial strategy that allows individuals to combine multiple debts into a single loan with a lower interest rate. This helps to simplify the repayment process and potentially save money on interest payments. Here are some things to consider when pursuing debt consolidation:

  • Evaluate your current debts and determine the total amount owed.
  • Research and compare different debt consolidation options, such as personal loans or balance transfer credit cards.
  • Calculate the potential savings and monthly payments for each debt consolidation option.
  • Apply for the chosen debt consolidation method and use the funds to pay off existing debts.
  • Create a budget to ensure timely repayments and avoid accumulating more debt.
  • Monitor your progress and celebrate small milestones as you work towards debt freedom.
  • Parachute is a debt consolidation company that helps you tackle your debt while receiving cash back for completing positive financial actions.

Snowball Method

The Snowball Method is a popular strategy for managing and reducing credit card debt. Here are the steps:

  • List all your credit card debts from smallest to largest balance.
  • Make minimum payments on all debts.
  • Allocate any extra funds towards paying off the smallest debt.
  • Once the smallest debt is paid off, apply the amount you were paying towards it to the next smallest debt.
  • Repeat this process until all debts are paid off.

Utilizing Balance Transfer Offers

Using balance transfer offers can be an effective strategy for managing and reducing credit card debt. Here are steps to effectively utilize balance transfer offers:

  • Thoroughly research and compare offers from different credit card providers.
  • Select a card with a low or 0% introductory APR on balance transfers to make the most of balance transfer offers.
  • Transfer your existing credit card debt to the new card to take advantage of the benefits.
  • Create a well-structured repayment plan to ensure timely payment and pay off the transferred balance within the introductory period.
  • In order to prevent further debt, refrain from making any new purchases on the balance transfer card.
  • Regularly monitor the expiration date of the introductory APR and make sure to pay off the transferred balance before it ends.
  • Calculate the fees associated with balance transfers and determine if the savings from the lower interest rate outweigh the costs.
  • Maintain discipline with your spending habits and continue making timely payments to effectively manage your credit card debt.

Frequently Asked Questions

What percentage of Canadians have credit card debt?

According to the reference data, 43% of Canadians currently have credit card debt.

What is the average credit card balance for Canadians?

The average credit card balance in Canada is $4,000, as stated in the reference data.

What factors have influenced changes in credit card behaviour among Canadians?

Several factors have influenced changes in credit card behaviour among Canadians, including higher prices for goods and services due to inflation, major unexpected purchases, reduced income from employment changes, and increased rent or mortgage payments.

How many Canadians rely on credit cards to pay for essential purchases?

According to the reference data, 70% of Canadian adults have used credit cards to pay for essential purchases in the past year.

What percentage of Canadians always pay off their credit card balances in full each month?

According to the reference data, only 58% of Canadians with credit cards always pay off their balances in full each month.

How long do Canadians with credit card debt believe it will take them to pay it off?

According to the reference data, 40% of Canadians with credit card debt believe it will take six months or longer to pay it off.

Is $5000 in credit card debt a lot?

The average credit card debt in Canada is just over $4200, so $5000 in credit card debt is slightly above average. However, it’s important to remember that household income, spending habits, and financial literacy can drastically impact how debt affects you. With any amount of debt, it’s important to put a plan into place and evaluate your personal financial goals.

Caitlin Carter
Caitlin Carter, Parachute’s, Head of Customer Success lives and breathes well-being - her passion over the last few years is how well-being is impacted by finances and conversely how finances are impacted by our well-being. She has a 15+ year career helping international brands execute on their global education and development strategy as well as define and monitor their operational KPIs.
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