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Latest trends and statistics about Canadian credit card usage

Friday, July 07, 2017

As the economic climate and consumers’ financial habits continue to shift, experts are finding that active credit card accounts are actually declining. But just because individuals are cutting back on the number of cards they are using to make purchases, does not mean they are reducing their credit usage altogether. In fact, despite the trend of obtaining fewer cards, consumers are actually accumulating more debt on the accounts they already have in the process.

Abakhan&Associates_Licensed_Insolvency_Trustee_Bankruptcy: woman holding a credit card

While this number has decreased by the largest amount in recent history last year at 1.8 percent, credit cards remain one of the highest interest rate sources at approximately 20 percent on average. Even customers who have loyally kept the same single card for years are ultimately penalized if they do not make full payments on each of their monthly statements. Whenever payments are missed, interest rates are tacked onto the amount owing. Suddenly, a loyal customer’s increased credit limit is more clearly a downfall in disguise and loyalty programs do not help pay the bills.

The misconception of loyalty programs

On one hand, consumers can reap the benefits that derive from competitive financial institutions who want their business and try enticing them either to stay as an existing customer or join them as a new one. However, many credit card companies are simply taking advantage of the known principle that consumers appreciate loyalty programs, which arguably distract from the high interest rates that continue to plague customers if they are late on payments. A Licensed Insolvency Trustee in Vancouver can assist in reviewing the terms of your various financial commitments.

Loyalty programs are certainly a high selling and enticement feature as many consumers feel they “win” rewards by using their credit cards. In the meantime, many users do not take into consideration the high interest rates if they are not paying off their purchases at the end of each month. The cashback, products or other incentives often do not compete with the amount of debt they accumulate so, even with a loyalty program, consumers are spending more.

Consumer debt and credit card usage

However, given the long relationships credit card users are having with their financial institutions, it is likely that their spending limits regularly increase, thus enabling them to spend greater amounts that result in greater debt―specifically, almost 2.5 percent more in the last year―over the long term. It is also naturally taking many Canadians longer to pay back these accumulations, leading to higher delinquency rates of 4.2 percent.

While British Columbia is not in the lead for delinquency rates per province, the entire country has been plagued by this reality. Total consumer debt last year from 2015 without the inclusion of debt from mortgages reached almost $22,000 on average, with an actual drop to almost 2.5 percent across Canada.

Before mismanaging expenses and overall purchases that can lead to debt, speaking to a Licensed Insolvency Trustee (Trustee in Bankruptcy) in Vancouver can be extremely worthwhile to review your financial situation, receive credit counselling, and explore potential debt solutions. Speak to one of Abakhan & Associates’ Trustees across British Columbia today for debt help.

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