How much debt is Canada in?
You don’t need to be a finance expert to understand that the COVID-19 pandemic has changed how we use money (have you noticed how much more often you’re tapping your card instead of touching the keypad to enter your PIN?). It’s affected our borrowing, spending, debt repayment and saving habits, too.
Statistics Canada reports the average household’s debt-to-income ratio rose in 2020. This measures the household debt, in relation to disposable income. In the first three months of the year, the ratio stood at 175.4%, which, according to MoneySense contributor Alexandra Macqueen, “means that, across all Canadian households, in the first three months of 2020 we collectively owed $1.75 for every dollar of disposable income we have. That is very close to the all-time high of 179% in late 2017.” (See Macqueen’s article Canada’s climbing debt-to-income ratio: what you need to know.)
MoneySense partnered with CIBC and its Pace It credit card to bring together this collection of articles about debt management. See links throughout this page for the stories. Each one offers achievable ways to identify, take action and get in control of your money.
The definition of “debt” and what it means to you
Simply put, debt is money owed. But figuring out how much total debt you have and how to tackle it may seem more complicated. Try breaking it down into steps, like in the article How bad is your debt? It gives these steps to truly understanding how much debt you have.
Start by making lists for everything you owe, from the highest interest rate to the lowest, including:
- How much you owe
- What your interest rate is
- How much you pay in interest each month
- What are your required minimum payment
Don’t include your mortgage on this list (more on mortgage debt, below). Do include any other loans, including school, car and personal, your credit card, etc. Once you do that, you can create a plan or a budget to pay it off within a realistic timeframe.
Other articles on dealing with debt include:
- ADHD debt help: Managing finances can be tough, but not unmanageable
- How COVID-19 has changed Canadians’ shopping habits
- Who is more in debt? Gen X or Millennials?
- The new way to avoid and manage debt: conscious spending
- 5 ways to save money on everyday expenses
Can a credit card be a debt management tool?
Have you ever thought of using a credit card to manage and pay off debt? It may seem like the type of advice from the same person who’d recommend hair of the dog to cure your hangover. But there are credit cards created specially for those experiencing debt, specifically with low or no-fee features, such as balance transfer offers for consolidating credit card debt. (More on that in the article Ways your credit card can help you manage debt.) There is also a new type of card feature that works like a layaway/installment plan, which you can add to your current credit card. (We break down how it works with CIBC Pace It here.)