Credit cards are feeding young Canadians more than actual food; As wages stagnate and rent soars, debt becomes the only thing they can afford

As the cost of living continues to rise and job prospects remain uncertain, an increasing number of young Canadians are finding themselves ensnared in a cycle of debt they struggle to escape.

Recent data from Equifax Canada reveals a troubling trend, individuals aged 18 to 25 have experienced a 15.1 percent increase in delinquency rates compared to the previous year.

Specifically, 90-day or more delinquencies on credit cards for this age group have surged by 21.7 percent, reaching a delinquency rate of 5.38 percent, significantly higher than the overall population's rate of 3.76 percent.


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"Being able to balance the cost of living with debt levels is more difficult and more challenging, which is why through the numbers we are seeing that stress come through," said Kathy Catsiliras, vice-president of analytical consulting for Equifax Canada. "They are finding it more challenging to stay current on their debt obligation, married with the fact we’re seeing unemployment rates increase."

Rise in unemployment

Canada's unemployment rate rose to 6.9 percent in April, according to Statistics Canada. This uptick in unemployment, coupled with stagnant wages, has left many young Canadians without sufficient income to manage their debts.

Consequently, some are resorting to credit cards or loans to cover essential expenses like food and rent.

Stagnant job market

The challenges are further compounded by a stagnating job market, partly attributed to the ongoing trade tensions with the United States. Due to President Donald Trump's tariff policies, some companies have had to scale back hiring plans or lay off employees.

Shannon Terrell, a personal finance expert with NerdWallet, highlighted the multifaceted pressures facing young Canadians:

"All of these factors combined can definitely make for a challenging financial situation in which your credit card is being used to bridge the gap, especially if you’re someone who’s living paycheque to paycheque," she said.

Lack of financial literacy

The situation is exacerbated by the fact that many young individuals are new to credit and may lack the financial literacy to manage it effectively. Matt Fabian, TransUnion Canada's director of financial services research and consulting, noted:

"They’re getting used to the fact if they charge a lot, those payments go up and they’re going to owe a balance. Some of them, they’re able to adapt and do just fine. Some of them, it’s a bit of trial by fire, so we do see sometimes heightened delinquency."

However, Fabian also pointed out a silver lining:

"We do see a high 'cure' rate, however, with youth who may have a 'trip and fall' eventually understanding how debt works and not missing payments."

A TransUnion Canada report showed youth are among two groups driving up the total debt of Canadians, with the group seeing their outstanding balances grow by 30.6 percent compared to the previous year.

How to dodge the debt trap?

Financial experts suggest that young Canadians facing debt challenges should consider developing a debt repayment strategy, exploring options like balance transfer credit cards or debt consolidation loans, and seeking guidance from financial advisors.

Budgeting is also crucial; ensuring that one can afford more than the minimum payment can prevent interest from accumulating and making debt repayment more difficult.