'Financial fragility is deepening': Canadian credit card data for Q1 show growing strain
Signs of deteriorating credit health among the most financially vulnerable Canadians are a 'flashing signal,' credit analytics firm FICO says.
New credit card data for the first quarter of 2025 show an increasing reliance on credit cards and more Canadians having trouble paying their balances, FICO says, with issues most pronounced among younger and 'thin-file' borrowers — people without much of a credit history.
'Consumers with fewer banking relationships — particularly younger individuals or those relying solely on credit products — are under increasing pressure,' FICO's report says. 'The surge in serious delinquencies among monoline borrowers' — people with credit cards issued by firms that don't offer other banking services — 'is a flashing signal: financial fragility is deepening where there is the least cushion.'
Economists at financial institutions and the Bank of Canada (BoC) have been paying close attention to Canadians' spending and credit health as ongoing trade tensions with the U.S. roil the economy. In a speech in early June, BoC deputy governor Sharon Kozicki noted that credit card data is one way the Bank can better understand Canadians' 'real-time spending patterns.'
FICO's data show Canadians are paying down less of their credit card balances on average, and note that 'average balances remain elevated' and are rising again from COVID-era lows, when spending was generally restrained. On average, Canadians repaid just over 47 per cent of their balances in March, down from a pandemic peak of 60 per cent in September 2022. Balances have risen to $3,098 from $2,938 during the pandemic.
'Although still below pre-pandemic highs, the recent upward trajectory signals renewed pressure on household finances, potentially from rising living costs or shifting spending habits,' FICO's report said.
FICO notes that the rising balances aren't a consequence of higher spending — average monthly spending was down 4.2 per cent from the same period last year, to $1,549, which FICO says 'reflects more cautious consumer behaviour or financial constraint as households rebalance their budgets.'
Overall, rates of missed payments are 'broadly stable,' FICO says, but risks are concentrated in some borrower segments. Those missing a single payment was up eight per cent from last year, which FICO says 'points to the beginning of strain among a growing portion of the population.'
Among monoline borrowers, who can have lower credit ratings, FICO notes a 'key turning point' in January, when the proportion missing two or more payments hit a five-year high. 'This spike highlights sustained pressure on higher-risk segments — particularly those with limited financial history, fewer products with a financial institution, or recent entry into the credit market,' FICO's report says.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf.
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Here is what you need to know: Britain's biggest bank to cut UK investments in snub to Reeves | Lloyds' pension arm will shift investments to better-performing markets 'Henrys' ditch Starmer as Labour taxes them to oblivion | Aspirational young voters feel hoodwinked by the PM's promise of 'wealth creation' Crown Estate to build hundreds of giant wind farms off Cornish coast | Offshore turbines likely to be visible from popular holiday resorts in South West and Wales Carney threatens to raise tariffs on US if Trump talks fail | Canadian PM prepares for month-long series of negotiations with the president Ambrose Evans-Pritchard: We are witnessing the death of American democracy | There are parallels but also differences between Trump's America and Germany in the early 1930s Crude oil prices rose and Asian shares were trading mixed as investors awaited more clarity on whether or not the US will join Israel's war against Iran. 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Australia's S&P/ASX 200 shed 0.3pc to 8,500.40 while South Korea's Kospi gained 1.2pc to 3,014.05. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
