Cdn. credit card debt shrinking at fastest pace since '90s: CIBC
Hey, Canadians … give yourself a round of applause!
Alright, well, maybe the above headline shouldn’t be cause for celebration, but in these times, I’m sorry, it kind of is.
At the same time we continue hearing about how $14.3 trillion over budget isn’t enough for the U.S. to run itself, a bit of intriguing news comes from Canada.
According to a new report, consumer credit debt among Canucks is no longer outpacing income.
It’s a simple statement – and one you’d teach a second-grader if financial literacy was something we considered seriously in this country – but after a nasty recession, one that many say was caused by our own misspending, it’s nonetheless a step in the right direction.
By the CIBC study, inflation-adjusted non-mortgage consumer credit is rising at the slowest pace since the early 1990s.
“We are seeing some early signs of softening in the credit markets, and that’s a good sign given the fact that our debt load is relatively high and we have to do something about it,” said Benjamin Tal, CIBC’s senior economist.
Of course, just because we’re cutting back on our credit card borrowing (“borrowing money for consumer goods has slowed so much, it is on the verge of deleveraging,” the Globe and Mail writes) doesn’t mean we totally get the picture.
If we include mortgages into the fold, we’re still a bit underwater. Total debt, accounting for home loans, continues to outpace income – in the first quarter of 2011, total credit outstandings rose by 1.8 per cent, income rose only by 0.7 per cent, says the CIBC.
Last month, the Certified General Accountants Association of Canada reported household debt had hit a record $1.55 trillion, meaning our nation’s debt-to-income ratio rose to 147 per cent.
So it’ll be interesting to see where we go from here. All throughout the recession, or at least as the downturn began to ease, we all swore, “Never again.” We would change our habits, and we would learn from our mistakes.
With credit cards, we may have. We have not gotten there with our mortgage debt yet.
From a credit card standpoint, at least, do you carry a lower balance now than you did two, three years ago (use an anonymous name in the comments if you like)?
By Jason Buckland, MSN Money
Posted by: michael | Jul 14, 2021 9:19:59 PM
Credit card debt is shrinking to a large degree because people are refinancing their locked in credit card balances through mortgages on the inflated value of their homes. It's now a ritual at mortgage renewal time. If they tracked how much consumer debt is being piled back on to mortgage balances the numbers would stagger you. Wonder what's going to happen when the housing bubble bursts?
Posted by: Will | Jul 15, 2021 8:24:12 AM
People are actually being more careful on spending. I am using my credit card less this year. This year I am focusing on paying down debts and hope to Eliminate them in a few months.
Just a question Michael where do you get these "staggering" facts from? Everyone I know is focused on paying down debt not incurring more and refinancing.
While I do agree that housing is sitting on a bubble. (house prices have continued to go up) If they roll the credit debt into the mortgage and stop using the credit card it increases monthly cash flow. This allows people to stay on top of their debts and pay them down faster by enabling people to make more than minimum payments on their debts.
Posted by: 9 to 5 | Jul 15, 2021 8:47:43 AM
Oh, yes. When I repaid my debts, the high interest credit cards were the first to go. This was all through conscientious budgeting and some consolidation onto a low-interest credit card, though. I didn't use my mortgage to refinance a thing.
A friend of mine also went through this credit card purge - she consolidated her credit card debts using an unsecured line of credit (again, not by refinancing her mortgage) and paid that off every month instead.
I think that more people use lines of credit and lower interest credit cards rather than touch their mortgages when they look at paying off credit cards. It's only common sense to know that the interest resulting from the massive amount your mortgage likely is will already be more expensive in the long run than those of your credit cards with higher interest rates carrying smaller amounts. And if people still aren't sure, a simple web search on debt reduction help tells you NOT to roll your debt into your mortgage if you can help it.
The Financial Consumer Agency of Canada (yes, it's a government website) has some great tips and publications for the general public on everything from budgeting to banking to credit cards to debt at http://www.fcac-acfc.gc.ca/eng/consumers/creditcard/index-eng.asp.
Posted by: Will | Jul 15, 2021 8:55:32 AM
I was just responding to the other poster's fear mongering. I agree that there are other ways to refinance with shorter term and sometimes lower rate options that should be looked at.
Posted by: Pat | Jul 15, 2021 12:15:40 PM
This boomer isn't worried. Pay off my credit card every month. No mortgage, no rent. I am totally without debt. Just socking it away to retire. Just want it to go well for my kids.
Posted by: Wayne | Jul 15, 2021 1:18:48 PM
Shrinking credit card debt is a good thing for personal financial stability. I myself have paid off and cancelled 4 credit cards in the last 3 and 1/2 months
Posted by: Yerallnuts | Jul 15, 2021 1:43:18 PM
Every time someone wriites about debt, someone comments on the supposed a real estate bubble in Canada - this is perhaps true in some market segments in many markets, particularly in Toronto, Vancouver and maybe Calgary, but the most recent bank appraisal of MY home puts it's replacement cost above it's market value - so in theory I'd get more money burning my home to the ground than I would selling it.
Posted by: Yerallnuts | Jul 15, 2021 1:45:40 PM
And credit card debt? Never had any. I hope never to have.
I use my credit cards to MAKE money, by taking advantage of cashback and affinity programs.
Posted by: Bank Hypocracy | Jul 15, 2021 3:00:28 PM
It's too bad that within 10 years the world economy will literally mean nothing. Judging by how currency just appears (latest U.S. debt relief plan... HOW is that money printed?), and with the increasing gap between the rich and the poor, Canadians shouldn't pretend that this economic crisis doesn't affect us. When inflation finally kicks in, there will not be a middle class; there will only be the super rich and the super poor, and take a guess which group will have a larger population...
The problem is that the world economy places so much importance on currency (not on trade goods) that when our children are being taught how important having money is in our material world, they have no choice but to believe organizations like the WTO and IMF. These corporations are in the business of doing business... in case you forgot what that means, it means that the most important statistic they can produce is their bottom line. They are bankrupting countries all over the planet, leaving regular folks to pick up the cheque.
Posted by: Jake | Jul 15, 2021 5:20:12 PM
I think it's really bad that Canadians can buy groceries with credit cards. When the cards are maxed, people have two choices - starve or steal.
Posted by: Jack | Jul 16, 2021 9:02:15 PM
I do not understand what it means to "carry a lower balance now than you did two, three years ago". Why would anyone in their right mind carry a balance on their credit card? That is the ultimate definition of stupidity. There is simply no acceptable excuse. Jake, what is wrong with using credit cards to buy groceries? I do it all the time. It is convenient. I have never paid a penny in interest on any credit card, and I have many of them and have been using them for over 40 years. NEVER ONCE PAID INTEREST! NEVER, NEVER NEVER! What do you mean "When the cards are maxed, people have two choices - starve or steal" Are you serious?!?!?!?! Who is that stupid? COME ON!
Posted by: SP | Jul 16, 2021 11:57:54 PM
"nation’s debt-to-income ratio rose" But wait, credit card debt is shrinking at the fastest pace since the 1990's Hurrah !
Thankfully general interest rates could never rise to the level of credit card rates. Well, Except for that time in the 1980's Oh, and those other times... Yes the unsinkable Canadian economy Titanic is moving along smartly, nothing to worry about here folks, house prices and incomes only ever go up (Just ask anyone in Florida, Ohio, Michigan....).
Posted by: calator | Jul 17, 2021 6:56:15 PM
I buy everything on CC but I've never paid interest...
Posted by: annony | Jul 18, 2021 10:53:46 AM
Uh difference is that most of the idiots think they NEED a credit card or they NEED to borrow..
It's called stop being a retard and stop giving your money away, If you don't have cash for something, DON'T BUY IT, Why do you think we are all in this mess.. Because we THINK we need to borrow and buy things, when we don't. LOL
Posted by: James | Jul 20, 2021 12:31:53 PM
@annony, I agree with your comments, but not about NEED. I need a credit card, but that does not equate to a "NEED to borrow". I need a credit card to do business. No car rental company or hotel will do business with me unless I have a credit card. My company will not allow me to pay with cash on any business trip, otherwise it comes out of my pocket. I have many personal credit cards, each of whcih I use for specific purchases. CCs are convenient compared to cash. I have never paid credit card interest because I always pay my statements in full. Furthermore, I get money back, 5% back on all gasoline/motor oil purchases each month as just one example. Also, if my wallet gets stolen, cash is lost forever. I've had a credit card stolen once, but it didn't cost me anything, and was quick to replace with no hassles.