Rising interest rates cause credit card spending decline

Rising interest rates and increased consumer debt has consumers pulling back on credit card spending, says Equifax Canada’s most recent Market Plus consumer credit trends and insights report. Canadian consumer debt reached $2.4 trillion and credit card balances reached an all-time high of $107.4 billion.  

“Canadians are demonstrating a shift in their spending habits due to the current economic volatility,” says Rebecca Oakes, vice-president of advanced analytics at Equifax Canada. “With various factors at play, individuals and households are actively adapting their financial strategies to navigate this dynamic landscape.” 

Balance growth and rising borrowing costs showed signs of impacting demand for many credit products in the second quarter. Minimum monthly payments for credit card and unsecured line of credit increased 11.7% and 18.3%, respectively, compared to last year. HELOC holders also saw their payments rise by over $200.  

Credit card spending has been consistently growing since the end of 2021 and is finally starting to slow, partly due to inflation drops and partly due to rising financial pressure from high interest rate credit products. Average monthly credit card spend per credit card consumer increased by 3.7 per cent in the second quarter as compared to 22.7 per cent in the second quarter of 2022. 

For more information, visit Equifax Market Pulse.