Canadian credit card debt soared in the last three months of 2022 amid rising interest rates and stubbornly high inflation with younger Canadians in particular relying on credit to make ends meet.

Canadians’ 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, according to credit monitoring agency Equifax.

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, the agency said in its latest quarterly credit trends report.

Equifax said the effects of higher interest rates are yet to be fully felt on homeowners as many have not yet renewed their mortgages, but younger Canadians are feeling the pinch of inflation particularly hard. 

The financial stress on Canadians is apparent in the latest data, especially for non-homeowners, said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada. 

"We are seeing pockets of financial stress starting to come through," she said, noting that insolvencies and missed payments on credit products are climbing. 

While mortgage debt makes up three-quarters of all consumer debt, and the cost of that debt has been rising with interest rate hikes, consumers are struggling with non-mortgage debt such as credit cards, Equifax said.

Non-mortgage debt levels were up 5.4 per cent in the fourth quarter, but for millennials that debt rose by 8.4 per cent. 

The growth in non-mortgage debt was driven by increased credit usage and reliance on credit cards, Equifax said. Consumers younger than 35 saw the biggest movement in credit card debt, and more than 1.4 million new cards were issued during the fourth quarter, a high volume that Equifax said contributed to the higher balances. 

People without mortgages tend to be younger and/or lower income, which is likely why they are struggling more with non-mortgage debt such as credit card debt, said Oakes. 

"They're starting to struggle a little bit. And the challenge is, inflation isn't coming down fast enough," she said. 

"They're relying on the credit card more, and they're maybe starting to miss payments a bit more."

There was also an increase in the number of consumers with at least one credit product, up 3.2 per cent from a year earlier and up 4.7 per cent from the fourth quarter of 2019. 

Equifax attributed some of these upticks in non-mortgage debt to an increase in immigration and refugee intake, and much of it to the higher cost of living.

Consumers without mortgages saw the greatest jump in missed debt payments in the fourth quarter, Equifax said. The proportion of non-mortgage consumers who missed a payment on a credit product in the fourth quarter was up 11 per cent from a year earlier, compared with six per cent for consumers with a mortgage.

Meanwhile, the delinquency rate among those aged 18 to 25 rose almost 31 per cent year over year, compared with a 17 per cent increase across all consumers. 

Even as credit card payments slowed down, credit card usage remained high, Equifax said, with more than 300,000 more consumers using their card and carrying a balance on it. 

The fact that payments are coming down while balances rise is "an early warning sign," said Oakes. 

Consumer proposals, meanwhile, were up 26.4 per cent from the previous year, though they were still below pre-pandemic levels -- with the exception of seniors.

Canadians who hold mortgages are starting to feel the pinch, though for some it may be delayed until they refinance, noted Equifax. The agency said that the average mortgage holder was paying $170 more monthly than they did before the pandemic, and expects this figure to rise further as more mortgages come up for renewal. 

Other debt products with variable rates, like home equity lines of credit, saw minimum monthly payments rise 24 per cent compared with pre-pandemic levels.

There’s a lag on the effect of higher interest rates on homeowners, Oakes said, many of whom have either not renewed yet, or haven’t hit their trigger rate. But she expects a shift in that soon as between 450,00 and 500,000 Canadians will renew or refinance their mortgages in 2023, at similar levels to 2022.

"It takes time for the full impact of high interest rates to come through," she said. 

With interest rates a far cry from where they were a year earlier, it might not come as a surprise that new mortgage originations (which include renewals and refinancing) were down almost 40 per cent year over year. This was particularly steep in markets like Toronto and Vancouver.

This report by The Canadian Press was first published March 9, 2023.