Who remembers those credit card ads from the 80s and 90s? The ones where someone’s drab life would suddenly transform into a world of luxury, vibrancy and exclusivity.
The credit card user was attractive, effortlessly stylish and “cool” compared to those without.
And of course, the card was depicted as the key to solving financial problems, rather than being a significant source of them.
Credit card debt has become a crushing concern among Canadians.
Total consumer debt in Canada hit a historic high of $2.5 trillion as outstanding balances across all credit products grew by 4.5% year-over-year in Q4 2024 (TransUnion).
This upward trend underscores the growing reliance on credit to manage daily expenses in the face of rising living costs — which is becoming even more turbulent due to Donald Trump’s global tariffs.
Causes of credit card debt
1. High cost of living
With inflation and rising expenses, many Canadians rely on credit cards to cover daily essentials such as groceries, rent, and utilities.
2. Minimum payment trap
Many people only pay the minimum amount due each month, which extends repayment periods and increases interest costs over time.
3. Unexpected expenses
Medical emergencies, car repairs, and home maintenance can lead individuals to rely on credit cards when emergency funds aren’t available
4. Lack of financial literacy
Not understanding interest rates, fees, and the impact of carrying a balance can contribute to excessive debt accumulation.
5. Over-reliance on credit
Some individuals use credit cards to maintain a lifestyle beyond their financial means, leading to unsustainable debt levels.
Consequences of credit card debt
1. High-interest costs
Most credit cards charge interest rates between 19% and 25%, making it difficult to pay off the principal balance.
2. Credit score damage
Late payments and high credit utilization ratios can negatively impact credit scores, affecting future borrowing opportunities.
3. Limits financial opportunities
High debt levels can restrict the ability to save, invest, or qualify for loans and mortgages.
4. Robs meaningful life moments
The mental and financial toll of credit card debt makes it harder to enjoy and participate in fun activities, events and experiences. The worry and risk attached to every amount of money spent is exhausting and alienating.
5. Increased stress & anxiety
High debt levels can restrict the ability to save, invest, or qualify for loans and mortgages.
Mental health & credit card debt
Beyond the financial burden, credit card debt can profoundly affect mental health and overall well-being, leading to stress, anxiety, and depression.
According to the Financial Consumer Agency of Canada, individuals with financial stress are:
- Twice as likely to report poor overall health.
- Four times as likely to suffer from sleep problems, headaches, and other illnesses.
- More likely to experience tension in personal relationships.
This magnitude of stress debt can cause can trigger detrimental coping mechanisms, such as overspending and addiction.
Of course, this creates a vicious cycle. Engaging in addictive and unhealthy coping mechanisms can come with strong feelings of guilt and shame.
The financial stress compounded with those feelings can further perpetuate damaging behaviour and pattern repeating.
Building a financial foundation
Our financial health intertwines with our physical and mental health. Implementing effective debt management strategies can alleviate stress and improve overall quality of life.
Credit card debt can feel overwhelming, but with the right strategies and financial discipline, regaining control is possible.
By understanding the root causes, being aware of the consequences, and taking proactive steps toward repayment, Canadians can work toward financial stability and long-term success.
If you’re struggling with credit card debt, consider reaching out to a financial advisor to explore the best solutions for your situation.
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