Do You Have Too Much Credit Card Debt?

^{By Bromwich+Smith Staff | 852 words | Reading Time: 4 minutes | Date: 2023/06/09}

We continue to hear increasing numbers of Canadians carrying high balances on their credit cards. Credit card debt is becoming more common, with many seeing credit cards as an extension of income or treating it as a line of credit. It may seem easy to jump to judgments and assume that those who are carrying high balances are over spending beyond their means, but it simply isn’t always the case. Many are using credit cards because they do not have emergency savings, or they are over extended and their monthly income is not covering their household bills. Lets look into what the implications of having too much credit card debt looks like. 

Understanding Credit Card Debt 

In the most simple terms, credit card debt refers to the amount of money owed to your credit card lenders as a result of using the card for purchases or cash advances. It is considered unsecured debt, which means it is not backed by collateral like a house or a car. The convenience of paying with a credit card, with credit vs cash that is in your bank account can be tempting for some.  Excessive credit card spending can have serious consequences on an individual's financial situation. This does not only reference consumer spending, but encompasses purchases in emergency situations. Over the past few years many Canadians have depleted their savings, and have not been able to replenish the accounts. So, if you have limited savings and need to replace a major household appliance, car, have to stop working, have a change in your family situation etc you may feel like there is no other choice available than to put the purchases on credit, and deal with them at a later time.  

Statistics on Credit Card Debt in Canada 

According to Equifax Canada, credit card debt increased by more than 15 per cent from the same period a year earlier and totalled more than $100 billion for the first time. 

In its latest quarterly credit trends report, the agency says overall consumer debt rose in the fourth quarter of 2022, with total debt at $2.37 trillion, up more than six per cent from the same period in 2021. 

While we know these numbers do not describe every household, they are the current national average, and provide insight to where Canadians are financially.  

Factors Influencing Credit Card Debt 

The instant gratification from purchases made with plastic cards, and the easy access to credit can lead individuals to overspend. In some households, the overall lack of financial literacy and budgeting skills may result in misuse of credit cards, which could affect credit scores and future credit opportunities. Additionally, the rising costs of living and interest levels, have made it difficult for those who were already struggling with debt to be able to maintain current payments, let alone catch up and pay off more of their debt. High-interest rates can quickly grow the total debt and making only minimum payments, often only cover the interest charges, extending the debt repayment process. Late fees or over-limit fees will further aggravate this, adding to the overall debt. 

The Impact of Credit Card Debt 

Carrying credit card debt can have severe outcomes for individuals. Mental health concerns brought on from financial stress including sleep problems, health problems, depression and anxiety are common side effects. ones Personal relationships and overall well-being are commonly reported as major concerns from those prior to reaching out for debt relief assistance.  

Credit card debt will halt any progress toward achieving financial goals. When dealing with overwhelming debt payments, it can be difficult to manage both debt repayment and savings. Furthermore, credit card debt can negatively impact credit scores, limiting borrowing options and affect your ability to guarantee favorable interest rates on future loans. 

Building Healthy Financial Habits 

To address credit card debt, it is important to start with healthy financial habits. This includes creating a budget, knowing your total income, tracking expenses- both variable and non variable, and prioritizing debt repayment. Reducing discretionary spending and finding ways to increase income can help with the debt payoff process. Additionally, exploring debt consolidation options including balance transfers to lower-interest credit cards, debt consolidation loans, consumer proposals or bankruptcy may be your best option to reduce your debt.  

Seek Professional Assistance 

For some, credit card debt may become overwhelming, and individuals may require assistance in overcoming their debt. This is not something to be ashamed of, as thousands of Canadians reach out every month to a Licensed Insolvency Trustee for debt relief help. When seeking help we recommend that you do your research and choose reputable professionals or organizations. Look for certifications, licenses, and positive reviews to ensure you're working with trustworthy and qualified people. 

Remember, reaching out for help is a positive step towards managing your credit card debt effectively and regaining control of your financial situation, and is never something to be embarrassed by.  Bromwich+Smith has a number of debt relief approaches to help get your life back on track. Reach out today for a free, confidential, non judgemental consultation to see if you qualify for debt relief programs. Bromwich+Smith’s Debt Relief Specialists are available by phone at 1.855.884.9243, or request a call back at contact us page.