Canadian consumers are turning to credit for liquidity, with the average credit card balance rising as high as $4,000, according to the recently released Q2 2023 Credit Industry Insights Report (CIIR) of TransUnion.
The company’s findings reveal a consistent increase in credit demand among Canadian consumers who are looking for additional financial flexibility as a result of the high cost of living. This should be of interest to dealers who may be directly impacted by this trend on the vehicle sales and financing front.
“Canadians, like the economy, remain persistently resilient,” said Matthew Fabian, Director of Financial Services Research and Consulting at TransUnion in Canada, in a statement. “However, the combined pressure of a high cost of living and elevated interest rates has created a payment shock, as the cost of debt has grown even heavier for some Canadian households.”
Fabian said that some financial pressure was offset through savings growth and strong employment. At the same time, many Canadian consumers have already dipped into their credit access as a means to short-term liquidity, he added.
Based on the report the current CII levels, which were at 106 in the second quarter of 2023 in Canada (up 1.6 points compared to 2022), are consistent with pre-pandemic levels. That small year-over-year increase stems primarily from increased demand for credit, offset by “continued deterioration in credit performance.”
According to TransUnion, this has been an ongoing trend for three consecutive months, as interest rate pressures had a noticeable effect on many Canadian households.
“The number of Canadian consumers holding an outstanding credit balance increased 3.3% from Q1 2023,” the company said in its news release. “While the number of consumers taking on higher credit balances rose across all risk tiers, subprime consumers — the riskiest segment — experienced an 8.9% YoY growth rate.
The full report is available here.
