Thanks to high interest rates and an increase in the cost of living, Canadians have accumulated $2.4 trillion in consumer debt. As more people turn to their credit cards to make ends meet, the average non-mortgage debt among Canadian credit users is $21,121.
Wondering how Alberta stacks to the rest of Canada? Alberta household debt is the highest in the country. This article explores what factors are contributing to Alberta’s high debt levels and what you can do if you’re struggling to pay your bills.
Alberta Household Debt
The average Alberta household is $24,439 (excluding mortgage debt). This is according to the most recent data from Equifax. When looking at the main cities within Alberta, Calgary’s debt was the highest among Canadian cities at $24,143, followed by Edmonton at $23,732.
Alberta delinquency rates, which express overdue debt, were up by nearly 1.5% in Q2 2023 compared to Q1. The year-over-year change from Q2 in 2022 to Q2 in 2023 was just over 18%.
Contributing Factors to Alberta Household Debt
As an Albertan, you might question why household debt is so high in the province. The factors contributing to an increase in Alberta household debt are largely the same across the country, with a few unique exceptions.
Cost of borrowing
The demand for credit is slowing across the country largely in response to the increased cost of borrowing. According to Equifax, since last year, the minimum monthly payment for credit cards went up nearly 12%, and 18% for unsecured lines of credit.
Canadians with a home equity line of credit (HELOC) saw an increase of $200 in their monthly payments. Those with car loans saw an increase of over $100 compared to last year.
What does this mean?
It means your personal debt is costing you more today than it did last year. It’s more expensive to borrow money and maintain the debt you already have. If you don’t have the disposable income or household savings to cover rising costs, you might be forced to turn to your credit card to bridge the gap.
Cost of living
In a recent poll by Angus Reid, 69% of Albertans rated the rising cost of living as the top issue facing Canadians. Recent data from Statistics Canada’s Market Basket Measure (MBM) that shows how much it costs a family of four to cover basic costs of living, including house prices, food prices, clothing, and transportation has surpassed cities like Vancouver and Toronto.
Data from 2022, reveals it costs on average $55,771 for a family of four to cover their basic needs in Calgary. Vancouver costs $55,727 and Toronto $55,262. The living wage in Calgary is not keeping up with the rising costs making it difficult for many to make ends meet.
Consumer price index
According to Alberta’s consumer price index (CPI), which indicates changes in consumer prices, Albertans saw an average increase of 2.5% in November across all goods compared to the previous month. This ranks lower than the Canadian average of 3.1%, and Quebec’s high of 3.6%.
Albertans saw items including rent, food, and healthcare have gone up since last year while energy prices (including gas and fuel) and communication have dropped.
While Alberta was the first province in the country to increase its minimum wage to $15 an hour in 2019, there hasn’t been an increase since. Several provinces and territories have implemented increases to their minimum wage in response to high inflation, leaving Alberta closer to the bottom.
|Newfoundland and Labrador
|Prince Edward Island
Data from the Government of Canada, Minimum Wage Database.
With a high cost of living and a stagnant minimum wage, this takes a toll on Albertan’s budgets.
Even though Alberta’s wages remain among the highest in the country at $1,236.31 per week, Alberta wage increases have not kept pace with the rest of the country. One contributor to the stagnant wages could be the population boom in Alberta cities like Calgary. With a constant supply of available workers, companies don’t have to compete for talent with higher wages.
A study conducted by research firm Nanos for Royal LePage found that by March 2024, approximately 3.4 million Canadians with a fixed-rate mortgage are set to renew. Thanks to rising mortgage rates, nationally 68% are concerned about their mortgage renewal. The rate is even higher among Albertans at 82%.
In preparation for rising rates, 28% of Albertans are considering switching to another mortgage lender, 27% extending their amortization period, and 23% extending their mortgage term.
How to Cope With Rising Debt?
If you feel like your household spending is out of control and you can’t keep up with the rising cost of daily life, you are not alone. The good news is – you have options. A Licensed Insolvency Trustee (LIT) provides various services to help you manage your debt, including:
In a credit counselling session, an LIT can work with you to improve your financial knowledge and understanding. Your counsellor can provide tailored instruction on topics like budgeting or how to manage credit and improve your credit score.
If you can no longer pay your bills, your LIT may recommend a Consumer Proposal. This entails working with your LIT to create an offer to pay your creditors a percentage of what you owe, extend the time you have to pay, or both.
In certain cases, Bankruptcy might be your only option. While this can feel scary, Bankruptcy is not designed to punish. The purpose is to give honest Canadians who are down on their financial luck, a second chance. A Trustee can guide you through the entire Bankruptcy process.
Take Control of Household Debt
If you want help managing your debt, reach out to one of our qualified Licensed Insolvency Trustees at Allan Marshall and Associates. With offices across the province in Red Deer, Edmonton, and Calgary, we can work with you to assess your financial situation and come up with a solution to eliminate your debt. For a free, no obligation consultation, give us a call at 1-888-371-8900 or reach us online.