Credit Canada

A second study in as many weeks is sounding alarm bells about Canadians racking up "troubling" amounts of debt, mostly because of reckless spending and irresponsible use of credit cards.

This survey – co-sponsored by non-profit credit counselling service Credit Canada and credit-card provider Capital One Canada – sets the tone for the companies' national credit education blitz, which begins Nov. 13.

The study presents yet another snapshot of Canadians' heedless spending habits, with 55 per cent of respondents admitting their expenses outpace their incomes for at least one month per year.

"That means that the majority of Canadians are at risk of being in a long-term financial bind as they try to play catch-up in the months that follow," the study says. "In fact, 14 per cent say that their expenses are greater than their income for six months, and 6 per cent say that this is the case for 12 months of the year."

With total debt in Canada already in excess of $1 trillion, consumers are sitting on a debt time bomb, warns Laurie Campbell, executive director of Credit Canada. "There is no way that Canadians can continue on this path because it really becomes a path of destruction," she said. "It's a debt crisis."

North America's consumption culture is largely to blame, Campbell said, suggesting Canadians ought to learn from the mistakes of Americans who are now defaulting on mortgages in record numbers precisely because of spiralling debt.

The online survey, conducted by Torque Market Intelligence between May 24 and June 26, is based on a randomly selected sample of 4,487 adults. The margin of error is plus or minus 1.46 percentage points, 19 times out of 20.

"The survey numbers indicate there is a problem and we want to be part of the solution," said Pam Girardo, spokesperson for Capital One Canada. "Further, we are lending people money and want to be paid back."
Last week, the Certified General Accountants Association of Canada released a report saying only a minority of Canadians are willing to admit their debt has increased significantly over the past three years, even though household debt has been rising at an annual clip of 4.7 per cent for the past 30 years.
Both surveys, however, pinpoint young adults as being the most vulnerable to accumulating debt because of a toxic combination of easy credit and growing financial illiteracy. The result is a growing number of young people graduating from college and university with high student loans and credit card debt.

Recent graduate Chris McNeil says his student loans force him to pick and choose between paying off his debt and covering daily expenses like new clothes for his 5-year-old daughter. The 33-year-old administrative assistant has two college diplomas, one in business management and the other in social work, and is servicing about $15,000 in student loans.

"It seems to take away options for me," McNeil said, adding he blames the government for his tight finances. "They've made it so expensive to get a post-secondary education ... Everyone knows now that if you want any kind of a decent job you have to get a post-secondary education."

Campbell acknowledges that education expenses can create a strain but said students ought to be more proactive about planning for those costs.

"Reproduced with permission - Torstar Syndication Services"