Canadians Trimming Credit Card Debts

Growth in non-mortgage debt is down 30 per cent this year over last year, mostly because Canadians are paying off their credit cards, the latest report from Equifax Canada shows.

Canadians are still taking on more debt, but at a much slower pace than they were last year, said Nadim Abdo, vice-president, Consulting and Analytical Services, Equifax Canada.

“Instead of opening up new loans or credit cards, they’re using their existing credit,” Abdo said.

It appears they’re also being smart with their money, transferring high-interest credit card balances to lines of credit, which typically have much lower rates of interest, Abdo said.

“People are still buying things with their credit cards, but then they’re transferring those balances to lines of credit and paying the balance off over time,” Abdo said.

Scott Hannah, president of the Credit Counselling Society, said the average indebtedness of the people seeking help from his organization this year is down about five to 10 per cent this year over last year, but the number of people seeking help is up about eight to 10 per cent.

The average person seeking help from the Credit Counselling Society has about $23,000 in credit card debt and is only able to make minimum payments, Hannah said.

Credit card debt has been going down for the past seven quarters, and dropped 3.8 per cent in the second quarter of 2012 over last year, Equifax found. While credit card balances are dropping, bank loans and lines of credit are growing, albeit more slowly than in the past. Bank instalment loans grew 3.4 per cent, while lines of credit, which typically have larger balances than credit cards, grew 0.5 per cent.

Michael Atkinson, Vancity’s director of sustainable wealth management, said he didn’t have the statistics to show whether consumers were paying off credit cards with lines of credit, but that if they are, lines of credit still require discipline to be paid off.