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Canadians carrying fewer credit cards, but higher balances

Canadian consumers are using fewer active credit cards than a year ago, but they are also actually using more credit and carrying higher balances, according to a new report from TransUnion.

Weak demand for new cards is the reason behind the drop, TransUnion says

TransUnion says the average card balance per Canadian user has crept higher, rising 2.3 per cent to $4,094 in the last three months of 2016 from a year earlier. (iStock/Getty Images)

Canadian consumers are using fewer active credit cards than a year ago, but they are also borrowing more on the ones they have, according to a new report released Wednesday by TransUnion.

The Burlington, Ont.-based company said the number of open and active credit cards in use by Canadians declined by more than 800,000 in 2016. There were 43.4 million active credit cards in Canada at the end the year of last year, down from 44.2 million at the close of 2015. 

Weak demand for new cards is the reason behind the drop, TransUnion said, adding that new credit cards originations over the first nine months of 2016 was off by almost 10 per cent from the same period in 2015.

Despite Canadians carrying fewer credit cards in their wallets and purses, the average card balance per user crept higher, rising 2.3 per cent to $4,094 in the last three months of last year from a year earlier.

More Canadians are also actively using card credit, resulting in an increase in total outstanding balances of 3.3 per cent in the last year, from $91.2 billion in the fourth quarter of 2015 to $94.2 billion in the fourth quarter of 2016.

TransUnion said consumer loyalty is a factor in that change in debt load.

"The increase in card usage was universal across all consumer credit risk tiers, and as a result, some lenders appear to be increasing credit lines to their customers to capitalize on this loyalty effect," Chris Dias, TransUnion Canada's senior vice-president of product innovation and analytics, said in a release.

Dias said TransUnions expects more lenders will eye bumping up credit lines in response to that higher demand.

"This is positive news for consumers, as they may benefit from increased competition for their business and greater access to credit," he said.

Delinquency rate up

With the rising debt levels, serious delinquency rates rose "modestly" year-over-year for each quarter of 2016, TransUnion said, with the ratio of balances at least 90 days past due standing at 4.21 per cent for the whole country over the last three months of 2016, up from 4.08 per cent a year earlier.

The rise is due to conditions in the hard-hit oil patch provinces, as both Alberta and Saskatchewan saw their delinquency rates climb by more than 22 per cent.

Meanwhile, delinquency rates in British Columbia and Ontario dropped by 2.1 per cent and 3.3 per cent, respectively.

The overall national average balance for all non-mortgage debt rose to $21,912 at the end of last year, up just over two per cent from $21,444 at the conclusion of 2015. Over the same time frame, the delinquency rate for non-mortgage debt eased to 2.65 per cent from 2.7 per cent.

Consumers undeterred

TransUnion said it is widely expected that interest rates, which have been low for years, will turn upward at some point.

"However, this scenario has yet to deter the Canadian consumer, and we believe the far majority of them will be able to weather the impact of these increases," Dias said.

The executive director of Consolidated Credit Counseling Services of Canada, Inc. found it encouraging that Canadians are carrying fewer cards in their wallets, but said consumers are still struggling to manage the debt on the one card they have.

"The findings from this report suggest that many Canadians are stretched very thin and that credit card debt is helping them to stay afloat," said Jeffrey Schwartz.

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