As high inflation rates drive up the cost of essentials, consumers are putting purchases small and large on their credit cards to alleviate some immediate financial pressure.
A Tuesday report by credit bureau Equifax Canada shows the practice is driving Canadians into debt as balances begin to outpace the ability to pay credit off.
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The report states that in the most recent quarter, credit card balances rose to their highest level since the final quarter of 2019. There was a 6.4 per cent increase in credit balances between the first and second quarters this year — and people are buying more credit cards, too.
“Overall consumer debt is on the rise,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada. She added that an increase in non-mortgage debt was one of the more enlightening trends to emerge from the report.
Somewhat expectedly, mortgage debt continues to climb because of high house prices and, in recent years, low interest rates that have buoyed people to take advantage of the market.
But it’s the debt accrued outside of the housing market that spells trouble.
“We all know that house prices have been going up over the last couple of years … some mortgage debt has also increased, but it’s really that non-mortgage component part that we’re interested in right now.”
Consumers who have a low credit score and are already at risk of missing payments are among the most likely to have seen a shift in credit balance. For those with a credit score lower than 620, there has been a 16.2 per cent increase in their credit balance since the second quarter of 2021.
But a rise in credit card debt can be seen across the board, Oakes said. “It’s lots of people across all age groups, across a lot of different credit risk scores, across different regions.”
Equifax’s corporate headquarters in Atlanta is shown here. A Tuesday report by the company’s Canadian bureau shows a reliance on credit cards is driving Canadians into debt as balances begin to outpace the ability to pay credit off. (Mike Stewart/The Associated Press)
All the while, lenders are offering “unprecedentedly” higher credit limits, Oakes said. According to the Equifax report, the current average credit limit rests at $5,800.
The findings reflect June 2022 data released by Statistics Canadalast month. The data agency said that credit card debt with chartered banks rose 1.6 per cent from the previous month.
That fifth consecutive monthly increase was a recent indicator that Canadians are increasingly relying on credit cards to manage inflated costs — as are other consumer trends, such as “buy now, pay later” services, which are used to purchase food, clothes and tech.
Prices go up, wages stay the same
Canadians are relying on their credit cards to keep pace with the cost of living. ‘I’m about to go buy a computer on my mom’s credit card because I have no other option,’ Nicolas Gislason said. (CBC)
Nicolas Gislason, an Uber Eats driver and student living in Toronto, said he doesn’t believe it’s possible to make ends meet at the current minimum wage.
“I’m about to go buy a computer on my mom’s credit card because I have no other option,” he said.
Several people interviewed by CBC News said that as inflation and interest rates have risen, and the cost of living has become more expensive, they haven’t seen wage increases to make up for the difference.
“None of us have gotten a raise since inflation has gone up, so your cost of living is going higher and not your wage. So, of course people are going to be using their credit cards,” said Melanie McQuillan from Vancouver.
Kerry Taylor, a Vancouver-based personal finance expert, told CBC News that healthy financial habits formed out of circumstance during the pandemic — including regular debt payment — didn’t endure once inflation and interest rates increased this year.
With interest rates going up, “anyone who has a loan, a mortgage variable rate, mortgage line of credit, home equity on credit, some student loans — they’re going to be paying more, so that’s going to add to being a little bit more cash-strapped,” Taylor said.
Analyzing a credit card bill for forgotten monthly expenses or subscription purchases is one way to save money, she says. At the grocery store, the unit price — the price per measurement — under each item is the most reliable indicator for deals, she says.
The Bank of Canada has been aggressively hiking borrowing rates since the beginning of the year to combat high inflation, which peaked in June at 8.1 per cent.
Russia’s war in Ukraine drove global inflation even higher starting in February, with food and energy prices skyrocketing and supply chain delays contributing to extra costs at the retail level.
In July, the central bank announced an additional considerable rate hike of 2.5 per cent. But Canadian economists are expecting yet another significant increase next week during a Sept. 7 meeting.
Taylor notes that as pandemic-related restrictions ease up, people are paying more just to get out of the house: a road trip to see a relative that requires a full tank of gas, an expensive plane ticket for further travel, or even picking up the tab at a restaurant or bar.
She, too, says that as inflation crept up to eight per cent, Canadians noticed their wages staying the same — and these consumers are turning to credit cards to “mind the gap.”
‘I have a credit card and use it and that’s the only thing because you can’t save,’ said Esther Imafidon in Toronto. (CBC)
Esther Imafidon, who moved to Canada from Italy in 2019, said that she has been relying on her credit card and isn’t currently able to save money as she racks up interest on missed payments.
“It’s stressful,” she said. “I have a credit card and use it and that’s the only thing, because you can’t save … I’m owing a lot of money. I’m owing a lot of money on the credit card.”
Taylor says that a turn to credit cards is “really the first step that people take when they have a shortfall because it’s really easy to do.”
“There’s not a lot of friction when it comes to tapping a piece of plastic to cover that shortfall.”
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
