Credit Card Spending Ramps Up As Inflation Soars

Consumer reliance on credit cards is increasing, with the average monthly spend per credit card consumer climbing by 17.5 per cent in the first quarter of 2022 compared to the lows of the first quarter of 2021, says Equifax Canada in its most recent ‘Market Pulse’ consumer credit trends and insights report. Ontario saw the biggest increase in credit card spending (up by 20.4 per cent) followed by Quebec (18.4 per cent) when compared to the same period last year. “Pent-up demand and increased travel with the easing of COVID restrictions, combined with soaring inflation have led to some of the highest increases in credit card spending we’ve ever seen. Unfortunately for consumers, this is also at a time when the Bank of Canada is raising interest rates,” says Rebecca Oakes, vice-president of advanced analytics at Equifax Canada. “Across age groups, Gen Z and Millennials are driving up higher consumer spending the most. With gas and food prices increasing at a higher rate than overall inflation, it’s very important for consumers to revisit their budget allocations.” New card volume was up by 31.2 per cent when compared to the year-ago period and by 5.1 per cent when compared to the first quarter of 2020. Lenders are providing higher credit limits to consumers on new credit cards, with the average credit limit on new cards this quarter reaching over $5,500, the highest it has been in the last seven years. Overall credit card balances are up by 9.5 per cent this quarter when compared to last year and by 2.4 per cent when compared to the last quarter. This has been the biggest year-over-year increase in credit card balances since the beginning of the pandemic, but these balances have yet to reach pre-pandemic levels.