Credit card debt pressures intensifying: Fitch

Canadian households are increasingly struggling with their credit-card debt, suggests new data from Fitch Ratings.

In the third quarter, the share of credit-card bills that were more than 60 days past due rose to 1.00% from 0.95%. The average monthly payment rate declined from 61.1% in the previous quarter to 58.8%.

“The recent softening in performance was driven by increased credit card utilization to manage finances for lower- to middle-income households, normalizing credit trends and higher interest rates,” the rating agency said in a report.

Fitch reported that its net charge-off index was more or less unchanged in the third quarter at 2.47%, compared with 2.48% in the previous quarter — which is up from its low of 1.68% in March 2022.

While charge offs are elevated from last year, “Canadian households are supported by a resilient labour market, including robust job and wage growth,” Fitch said.

Looking ahead, Fitch said it expects further weakening “as the higher costs of living add to the difficulty indebted households face managing higher monthly payments under a higher-for-longer interest rate environment.”

Lower-income households and more highly leveraged households are expected to feel these pressures most acutely, it said, as they “generally have lower levels of excess savings and financial resources to weather the effects of inflation and higher debt servicing costs.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.