There was a sharp decline in the use of credit cards in the last half of March! This led to the first drop in consumer debt balances in more than a decade! Average debt excluding mortgages dropped 0.5% to $23,386 as of March 31, 2020 vs a year earlier. These data points are compliments of Equifax.
Despite this headline good news should you be experiencing negative changes in the payment behavior of your customers CASE can help! As a collection agency with offices in Edmonton, Calgary and the GTA we can apply our best professional efforts in order to make your past due accounts receivable a top priority.
With most stores and restaurants closing in mid-March as the result of Covid-19 the decline in credit card use should be no shocker. This is a trend that the numbers will clearly show as continuing for who knows how long at this point.
Good news for debtor balance sheets you say? Not so fast. We have to dig a little deeper than just the headlines. Let’s go beyond the 140 character attention span of most people these days.
According to a report released by Statistics Canada earlier this month household debt ratios rose to 176.9% as of the end of Q1 (March 31, 2020). In plain language this means $1.77 in total credit market debt exists for every $1.00 of disposable income.
Despite a decrease in credit induced spending, it appears incomes are decelerating at an even faster rate as the result of the Covid lockdown. All this despite the billions being shoveled out the front doors of Ottawa (compliments of generous Canadian taxpayers) incomes continue to decelerate.
Overall, Statistics Canada said credit market debt totaled $2.33 trillion as of March 31, 2020. This monster number includes $1.53 trillion in mortgage debt and $802.1 billion in consumer credit and non-mortgage loans.
We genuinely feel things will further deteriorate in the coming months as the global economy continues to limp along during these times of unprecedented uncertainty.
As for any and all producers out there, prepare accordingly to see that big fat invoice from Ottawa to help pay for all of this at some point. Idleness is not free.