How Canadians Are Paying Off Credit Card Debt

A recent TransUnion report shows a growing number of Canadians are seeing their credit card balances rise as higher interest rates and the cost-of-living squeeze strain household budgets. The report, released Tuesday, found the share of Canadians making only the minimum monthly payment on their credit card climbed eight basis points to 1.3% in the first quarter compared with the same period last year.

What is causing debt for Canadians?

Matthew Fabian, director of financial services research at TransUnion Canada, says many households are finding incomes that no longer keep pace with inflation and rising interest costs, forcing them to rely more heavily on credit to cover everyday expenses.

“Consumers that have had significant increases in their mortgage payment have made that deliberate trade-off to pay less on their credit card and in some cases, they’re missing their payment,” Fabian said. “We’ve seen a higher delinquency rate in credit cards for those consumers that have mortgages than traditional credit card consumers.”

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How much debt do Canadians have?

According to the TransUnion report, total consumer debt in Canada reached $2.38 trillion in the first quarter, up from $2.32 trillion a year earlier and only slightly below the record $2.4 trillion recorded in the fourth quarter. The data showed 31.8 million Canadians held one or more credit products in the first quarter, an increase of 3.75% year‑over‑year. Much of the growth came from newcomers and Gen Z consumers opening their first credit accounts.

The report highlighted a roughly 30% increase in outstanding credit card balances for the Gen Z cohort compared with the previous year, reflecting that many young people are accessing credit for the first time and are still learning how to manage monthly obligations. “The younger generation (is) only getting access to credit for the very first time in their life,” Fabian said. “They’re still learning how to use it, they’re still learning what it means to pay your monthly obligations.”

Millennials now hold the largest share of outstanding consumer debt—about 38%—which TransUnion attributes to life-stage factors such as buying homes, having children and taking on auto loans. “The structure of the debt is shifted where 10 years ago, the majority of them would have had credit cards and car loans,” Fabian noted.

Are mortgages in Canada at risk for defaults?

Fabian said the risk of broad mortgage defaults remains limited thanks to the strict screening and underwriting standards introduced by regulators and lenders. Those protections mean borrowers were generally vetted for their ability to carry higher payments before receiving a mortgage. In practice, cash‑strapped consumers tend to prioritize mortgage payments over other obligations, which can push delinquencies toward credit cards and auto loans instead.

While there are concerns about missed payments among vulnerable households, Fabian said Canadian consumers have shown resilience, especially given the rapid growth in credit participation among younger cohorts. He also noted that anticipated interest rate cuts—expected by some market participants as early as June—could help ease household financial pressure and allow balances to stabilize over time. “Our expectation is that the market will start to correct back to normal,” he said.

Read more on dealing with debt:

• How much credit card debt does the average Canadian have?
• What happens if I don’t pay my credit card bills?
• Why young people keep getting caught in debt traps and how to break the cycle
• The best balance transfer credit cards
• The best low-interest credit cards