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Canadian credit card debt still not abating

Apr 16, 2012 Walt Wojciechowski

Personal debt continues to rack the minds of consumers throughout North America. While recent trends have hinted at gradually improving economies in both Canada and the U.S., both markets remain tempered by high unemployment and general uncertainty. These challenges are exacerbated by high consumer debt levels, particularly on credit cards and student loans. According to a survey released this week by rate comparison service, 60.1 percent of Canadians are not comfortable with their current level of debt. Credit card balances are of the most concern, cited by 38.3 percent of respondents. One-third of respondents admitted they've gone into debt over something they later regretted. Car purchases and bad investments were cited as the biggest "debt regrets." Contrary to perceptions of post-recession consumer frugality, most of these debts seem to have risen from large, extravagant purchases, instead of frequent spending on normal items, such as clothing, restaurants, gifts and holidays. "We're not seeing people overspending on luxury or big-ticket items," said Kelvin Mangaroo, president of in a statement. "Rather, it's a slow and steady pattern of small purchases combined with smaller credit card payments that are putting a huge number of Canadians into debt." This may also drive up demand for debt collection services, as many consumers are still burdened by other finances and unable to pay off their dues. Worse yet, many consumers appear uninformed or in denial about their debt levels, as more than half of surveyed Canadians - 53 percent - believe they have less debt than the average Canadian. Slightly more than 30 percent believe their debt is average, and only 16.3 percent believe their debt is higher than average. "We found that one of the largest contributors to credit card debt seems to be impulse purchases of small items or food and entertainment, which, left to accumulate interest, can ultimately lead to a huge mountain of debt," Mangaroo added. In the U.S., consumer debt appears to stem more so from student loans. The Federal Reserve Bank of New York recently reported that the total volume of student debt has surpassed that of credit cards and auto loans.