Nearly one in four Canadians surveyed by Equifax Canada say they expect to make only the minimum monthly payment on their credit cards, as more households report using credit and savings to cover everyday expenses.
The survey of 1,532 Canadians also found that seven per cent expect they will fall behind on their credit-card payments, while 56 per cent expect to pay their balances in full each month.
The findings point to growing financial pressure among some households, with 40 per cent of respondents saying they are spending more overall than they were a year ago, compared with 18 per cent who are spending less.
Credit and savings used for essentials
The survey found that Canadians are increasingly drawing on credit and savings to manage household expenses.
Twenty-nine per cent of respondents said they are using more credit than they were a year ago to pay for groceries, utilities and other essential living expenses. Another 23 per cent said they are drawing on savings to cover day-to-day costs, while 20 per cent said they are relying more on credit cards and lines of credit.
At the same time, 35 per cent said they have reduced contributions to savings, investments or education funds. Forty-four per cent said they worry they are not saving enough for retirement, while 41 per cent are concerned about unforeseen emergency expenses.
“The results point to mounting financial pressure for many households,” said Rebecca Oakes, Vice-President of Advanced Analytics at Equifax Canada. “The survey indicates that a significant percentage of Canadians surveyed (29 per cent) are using credit and savings to manage everyday expenses, while 35 per cent are cutting back on contributions to save for their future and expecting to make only minimum credit card payments. When these pressures begin to overlap, households can lose financial flexibility quickly.”
The survey also found that 32 per cent have reduced spending on essential living expenses, including groceries and utilities.
Discretionary spending also down
Canadians surveyed reported cutting back on discretionary expenses as well. Sixty-seven per cent said they have reduced spending on entertainment and leisure, while 40 per cent have cut spending on personal care.
The survey found that 60 per cent of respondents are actively avoiding taking on new debt. At the same time, 13 per cent said they are borrowing more to cover basic living expenses, while eight per cent said they are opening new credit cards or taking on new loans.
Financial confidence has also weakened. Twenty-nine per cent of respondents said they are less confident in their ability to manage financial demands than they were a year ago, compared with 23 per cent who said they are more confident. Forty-seven per cent said their confidence is about the same.
“Financial pressure often builds gradually, and making only the minimum payment can sometimes feel like a way to manage through a difficult month,” said Julie Kuzmic, Head of Consumer Advocacy and Compliance at Equifax Canada. “However, balances can take much longer to repay and cost considerably more in interest. Anyone seeing their balances continually rise with little hope at repayment should review payment obligations, prioritize due dates and explore options with their lenders or a reputable credit counsellor before their financial situation limits their options.”
Families, younger adults report greater pressure
Households with children reported greater financial pressure than those without children.
Fifty-one per cent of respondents with children said they are spending more than they did a year ago, compared with 35 per cent of those without children.
Among households with children, 42 per cent said they are using more credit than last year to pay for essential living expenses, compared with 24 per cent of households without children. Thirty-three per cent of respondents with children expect they will only be able to make minimum monthly credit-card payments.
Forty-five per cent of those with children said they are concerned about supporting family members, including children’s education or aging parents, compared with 18 per cent of those without children.
Respondents under 55 also reported greater financial pressure than older respondents. Thirty-six per cent of those under 55 said they are using more credit for essential expenses than they were a year ago, compared with 18 per cent of those aged 55 and older.
Among respondents under 55, 42 per cent said they are spending more overall than a year ago, compared with 36 per cent of those aged 55 and older. Thirty-one per cent expect they may only be able to make minimum monthly credit-card payments, compared with 16 per cent of older respondents.
Twenty-two per cent of respondents under 55 said they are struggling to pay down debt because of high housing or mortgage costs, compared with 11 per cent of those aged 55 and older.
Only 47 per cent of Canadians under 55 expect to pay their credit-card balance in full each month, compared with 69 per cent of those aged 55 and older.
More from Retail Insider:
