It’s the season to spend and consumers are ringing up debt, with more of it going on credit cards.
‘Season’s spendings to you,” Nature Boy announced on Monday. To mark the holiday shopping season’s start, he decided a laptop upgrade was necessary. Just as Black Friday leads to Cyber Monday-turnedCyber Month, buying a new computer led to buying new shoes. And, because his supply of black trousers had experienced a recent series of backside blowouts, he decided to take advantage of an online inventory blowout.
A year’s worth of socks also was added to his bill before he finished.
Nature Boy is among the growing number of Canadians who regularly shop online. A recent CBC Marketplace survey of Canadians’ shopping habits reveals that almost half of Canadians say they shop online at least once a month.
The Marketplace poll indicates that number rises as age decreases. Almost 70 per cent of Canadians under 35 shop online at least once a month.
However, if you review other polls, the overall results are murky. For example, KPMG International’s Consumer Markets reports that gen-Xers make 20 percent more cy ber transactions than millennials do, and baby boomers shop online just as often as millennials do (and tend to outspend them per transaction).
Sample selection and size might explain the differing results.
However, young people favour mobile-payment technologies such as Apple, Android or Samsung Pay and Bitcoin more than other generations. Younger and higher-income Canadians, as well as urban dwellers and those with a higher education, are adopting mobile payment systems more readily.
For the time being, however, credit cards seem to remain the first choice for most Canadians for making payments.
Nature Boy joins the growing number of British Columbians who are ditching cash altogether in favour of plastic when they shop. According to Moneris, a leading processor of debit and credit-card payments in Canada, purchases made with plastic in B.C. between April and June this year were up by more than five per cent over the same period in 2016. The increase was more than a percentage point higher than the 3.88 per cent average national increase.
The trend continued in the year’s third quarter. Dollar volume for B.C. debit and credit-card purchases rose by 6.32 per cent. The national average was 5.05 per cent, and the next highest spending — in Ontario — was 5.62 per cent.
Even two years ago, only 25 per cent of transactions by Canadians used cash. Credit cards accounted for the majority of transactions at 42 per cent. Moneris predicts that, by 2030, cash purchases will make up only 10 per cent of money spent in Canada.
Credit-monitoring agency TransUnion reports that Canadians have consolidated the number of credit cards in use. In 2016, Canadians had 800,000 fewer credit cards overall compared to 2015. We might be carrying fewer cards, but we’re apparently offsetting that with higher credit-card balances. The total, aggregated credit card balance for Canada rose to more than $94 billion, an increase of 3.3 per cent over 2015.
At the individual level, the average credit-card balance grew 2.3 per cent year-over-year to almost $4,100 by the end of 2016. All consumer credit-risk tiers carried higher balances, which pushed credit limits upwards and, in turn, invited higher balances.
As we’ve been told repeatedly, credit-card debt is the most expensive debt to carry, so these heavier balances have to hurt — especially after this year’s two interest-rate hikes. The MNP Debt Index indicates that one in three Canadians say they’re now feeling squeezed, and four in 10 say that, if interest rates go up much more, they could be in financial trouble.
The survey reveals that millennials are the most likely to feel the effects of interest-rate hikes, and have the most fear about the impact of future rate increases on their financial situation. Gen-Xers most regret having taken on debt.
With the year’s biggest retail spending season only just begun, credit-card use, balances and debt by all age groups will be increasing in the coming weeks.
But at least Nature Boy will be paying off his debt without his backside and toes on full view to the world.