In September, Equifax revealed that the average Canadian now owed $73,532.
This was up 2.2% from the previous year. Canadian savings rates have increased significantly during the pandemic, but mortgage debt levels fueled the rise in debt. Debt from credit cards, auto loans, and lines of credit fell in the year-over-year period.
Low interest rates have made credit easily available in this climate. However, Canadians should focus on paying down credit card debt right now. The Bank of Canada is forecasting a low interest rate environment for the foreseeable future as Canada still wrestles with the pandemic-sparked economic slowdown. Instead of seeking out more credit, this is the perfect time to pay it down.
Canadians have saved significantly more as COVID-19 restrictions and lockdowns have cut down or cut out leisure activities for most of the country. If you have high credit card debt, you should be using these increased savings to service it. Credit card debt is, on average, much higher than interest rates for auto loans, mortgages, and lines of credit.
If you are playing catch up, you can also explore a balance transfer credit card.
This credit card offers an ultra-low introductory interest rate for a set promotional period. For example, 1.99% for six months. That gives you a set amount of time to aggressively pay down a high balance on your card.
Canadians should take advantage of low rates and increased savings in 2021 and clear their credit card debt ahead of what could be a less friendly rate environment in the future.
