There was a surprising drop in the amount borrowed on credit cards by Canadians during the holiday-laden fourth quarter, but overall non-mortgage debt went up substantially across the country, a credit analysis firm reported Wednesday.

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A consumer pays with a credit card at a store in Montreal in July. Credit rating firm TransUnion says consumer debt load increased in the fourth quarter. ((Ryan Remiorz/Canadian Press))

TransUnion said average total debt per Canadian consumer, excluding mortgages, was $25,709 in the fourth quarter of 2010 — up 5.6 per cent from $24,346 in the comparable period of 2009.

Only a small portion of the total in either year was drawn on credit cards, which usually charge among the highest rates of interest.

The surprise, according to TransUnion, was that the average credit card debt in the fourth quarter of 2010 dropped by 2.7 per cent from a year earlier to $3,688.

Lines of credit were the biggest form of consumer debt tracked, and increased to nearly $34,000 — up 8.8 per cent over the year.

"From the increase in lines of credit this quarter, one can safely assume that many Canadians ultimately relied on this form of credit during the last three months of 2010 and the important holiday shopping season," said Thomas Higgins, TransUnion's vice-president of analytics.

Paying it off

New rules require credit card companies to state on your bill how long it would take to pay off your debt if you only make the minimum payment.

Paying off TransUnion's estimated Canadian average of $3,688 in credit card debt would take: 

  • Eighteen years and 11 months by making the minimum payment - as long as you made no further purchases.
  • Four years and one month, if you paid $110.64 each month.
  • One year and 11 months, if you paid $200 each month.

It would take 23 years and four months of minimum payments to clear a debt of $7,500. Interest charges would be $9,014.10.

You can figure out how long it would take to clear your credit card debt by using this calculator.

"Since many lines of credit offer attractive interest rates, many Canadians have learned to use credit cards in their initial purchase and then pay off or down the balance using their line of credit. This allows them to take advantage of both the loyalty programs many credit cards offer and lower interest rates of their line of credit."

Total auto debt declines

Auto loans were the second-biggest form of non-mortgage debt tracked by the report and TransUnion found the Canadian average rose to nearly $16,200 per borrower in the fourth quarter, up 11 per cent from a year earlier.

However, it found that total auto debt for the country as a whole declined to $45.8 billion in the fourth quarter, from $48.3 billion in the comparable period of 2009.

"While total auto debt continues to decline in Canada, it is interesting to see auto debt per auto borrower rise," Higgins said.

"This means those Canadians with autos loans are either purchasing higher end vehicles, or newer ones."

TransUnion's analysis is based on an active credit population of 24.9 million consumers in Canada.

Mixed signals on debt

TransUnion: Average total debt per consumer in fourth quarter of 2010 is $25,709, up 5.6 per cent from same period in 2009.

CIBC: Canadians "getting the message" on debt dangers. Growth in household debt in third quarter of 2010 was the slowest in almost 10 years. Debt no longer increasing faster than value of assets.

Bankruptcy Canada: Consumer bankruptcies fell by 19.5 per cent from November 2009 to November 2010, according to figures released by the Office of the Superintendent of Bankruptcy Canada. Business bankruptcies fell by 22.9 per cent over the same period.

Certified General Accountants Association of Canada:  Total household debt reached $1.41 trillion in December 2009 - or $41,740 for every person in the country. That's 2.5 times higher than 20 years earlier.

With files from the Canadian Press