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TransUnion: Surprise Drop in Canadian Credit Card Debt During Holiday Season

Despite Drop in Credit Card Debt, Total Debt Rises in Fourth Quarter of 2010

TORONTO--(Marketwire - February 16, 2011) - TransUnion's quarterly analysis of Canadian credit trends found that total debt per consumer (excluding mortgage) for the nation increased to $25,709 in the fourth quarter of 2010, up 2.2 percent from the third quarter of 2010 ($25,163). Though total debt generally rises in the fourth quarter because of holiday shopping, among other things, TransUnion found that credit card debt actually declined nearly 3 percent during this period. Conversely, lines of credit, revolving loans and installment loans all showed marked increases in the quarter.

The report is part of a series of quarterly consumer lending sector analyses focusing on trends in the credit card and automotive lending industry. Leveraging TransUnion's credit database, the information for this analysis is culled quarterly from anonymous credit files of all credit-active Canadian consumers, providing a real-life perspective on how they are managing their credit health.

4Q2010 -- Overall Debt/Credit Card Statistics

  • Total debt per consumer (excluding mortgage) has increased 5.6 percent in the last year (25,709 in Q4 2010 from $24,346 in Q4 2009). All Canadian provinces have experienced year-over-year increases in total debt per consumer. 
    • Newfoundland & Labrador has seen the greatest increase in the country, up 8.1 percent from $21,497 in Q4 2009 to $23,234 in Q4 2010. Ontario had the second largest increase, rising 6.4 percent from $23,712 in Q4 2009 to $25,239 in Q4 2010.
    • The smallest increases occurred in British Columbia (3.1 percent), increasing from $35,669 in Q4 2009 to $36,785 to Q4 2010, and Quebec (3.71 percent), moving from $16,800 in Q4 2009 to $17,424 in Q4 2010. 
  • The total active credit population in Canada as of the fourth quarter of 2010 is 24.91 million consumers, up from 24.85 million consumers at the end of 2009. 
  • Canadian average credit card borrower debt (defined as the aggregate balance on all credit cards for an individual bankcard borrower) declined to $3,688 in the fourth quarter of 2010 after two straight quarterly increases. Credit card debt is down 2.7 percent compared to the fourth quarter of 2009 ($3,790).
  • The national credit card delinquency rate (the ratio of credit card accounts 90 days or more delinquent) increased to 0.36 percent in the fourth quarter of 2010, up 5.9 percent over the previous quarter. Year over year, credit card delinquencies decreased 7.7 percent from 0.39 percent.
    • Prince Edward Island had the highest credit card delinquency rate at 0.66 percent while Quebec had the lowest (0.23 percent).

Market Analysis
"Our latest data set shows that the effects of the recession are still flowing through the system with the number of derogatory accounts increasing 22.1 percent in Q4 2010 compared to the same time period last year. Cautious spending behaviours involving the use of credit cards could also be seen during the holiday period as that debt dropped for the quarter and lines of credit and other forms of payment became king. Usually credit card debt increases at the end of the year as people charge their holiday purchases.

"On a positive note, delinquencies for all credit vehicles continue to decline. Both minor (30 and 60 days past due) and major (90 and 120 days past due) delinquencies dropped 10.6 percent and 22.5 percent in the past year. This is a sign that Canadians are continuing to better manage their finances."
Thomas Higgins, TransUnion's vice president of analytics and decisioning

4Q2010 -- Lines of Credit Statistics

  • Lines of Credit (LOC) are the largest category of consumer debt in Canada (excluding mortgages) accounting for over 42 percent of the outstanding debt in Canada at the end of Q4 2010. Alberta and Ontario residents are proportionately the largest users of LOC accounting for over 57 percent of all LOC debt.
  • The LOC delinquency rate (the ratio of LOC accounts 90 days or more delinquent) is the lowest of any product category at 0.20 percent and declining with derogatory accounts down 5.4 percent and 90-120 day past due accounts down 11.1 percent versus last year.
    • The Northwest Territories and Nunavut have the highest LOC delinquency rates in Canada exceeding 0.39 percent. Quebec (0.12 percent), Saskatchewan (0.14 percent) and Newfoundland & Labrador (0.14 percent) have the lowest rates in the nation.
  • Canadian LOC borrower debt (defined as the aggregate balance on all LOC for an individual LOC borrower) increased for the fourth straight quarter to $33,981 from the previous quarter's $32,649, posting an 8.8 percent increase compared to the fourth quarter of 2009 ($31,230).

Line of Credit Delinquency/Debt Analysis
"From the increase in lines of credit this quarter, one can safely assume that many Canadians ultimately relied on this form of credit during the last three months of 2010 and the important holiday shopping season. Since many lines of credit offer attractive interest rates, many Canadians have learned to use credit cards in their initial purchase and then pay off or down the balance using their line of credit. This allows them to take advantage of both the loyalty programs many credit cards offer and lower interest rates of their line of credit."
Thomas Higgins, TransUnion's vice president of analytics and decisioning

4Q2010 Auto Statistics

  • The Auto delinquency rate (the ratio of Auto accounts 90 days or more delinquent) declined slightly to 0.11 percent in the fourth quarter of 2010 versus the previous quarter, but is down noticeably from a year ago (0.14 percent).
    • Manitoba and Nunavut have the highest auto delinquency rates in Canada at 0.39 percent. Newfoundland and Labrador (0.07 percent) and Quebec (0.08 percent) have the lowest rates in the nation.
  • Canadian auto borrower debt (defined as the aggregate balance on all auto loans for an individual auto borrower) increased for the third straight quarter to $16,189 from the previous quarter's $16,183, posting an 11.2 percent increase compared to the fourth quarter of 2009 ($14,557). However, total auto debt for the nation declined from $46.3 billion in the third quarter of 2010 to $45.8 billion in the fourth quarter of 2010. Total auto debt at the end of 2009 was $48.3 billion.

Auto Delinquency/Debt Analysis
"While total auto debt continues to decline in Canada, it is interesting to see auto debt per auto borrower rise. This means those Canadians with autos loans are either purchasing higher end vehicles, or newer ones. We also continue to see positive signs with auto delinquencies as they continue to decline, with the ratio of auto accounts 90 days or more delinquent at just 0.11 percent."
Thomas Higgins, TransUnion's vice president of analytics and decisioning

TransUnion's Market Trends
TransUnion's Market Trends is an in-depth, full sample solution that provides statistical information every quarter from TransUnion's national consumer credit database. Each Canadian consumer record contains hundreds of credit variables that illustrate consumer credit usage and performance. By leveraging Market Trends, customers from a variety of industries can analyze industry trends over an entire business cycle, helping to understand consumer behaviour in different geographic locations throughout Canada. 

About TransUnion
As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Based in Toronto, with global headquarters located in Chicago, Illinois, TransUnion provides service and support throughout Canada. Visit www.transunion.ca to learn more.

Graphics and/or photographs to accompany this release can be obtained by members of the media by contacting Cliff O'Neal at 312-985-2540 or coneal@transunion.com or Dave Blumberg at 312-985-3059 or dblumbe@transunion.com.

Contact
Dave Blumberg
TransUnion
E-mail: Email Contact
Telephone: 1 312 985 3059/ 312 972 6646

Media Contacts

Consumer, Corporate and International

Clifton O'Neal
coneal@transunion.com

Credit Statistics, B2B and International

Dave Blumberg
 

 
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