Canadian debt Archives - Ira SmithTrustee & Receiver Inc.

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Canadian household debt at a record high

The ratio of Canadian household debt to disposable income has hit a record high of 164.6%. This means for every $1 of after tax income Canadians earned, they owed nearly $1.65 in credit market debt – mortgages, credit cards and other kinds of consumer loans. The reality is that many Canadians are living in a financial danger zone. They’re walking a financial tightrope where anything like the loss of a job or an increase in interest rates can throw off this delicate balance and plunge them into financial disaster.

Increase is no surprise

TD Bank economist Jonathan Bendiner wrote about Canadian household debt, “The increase came as no surprise. Rising mortgage debt drove most of the growth as interest rate cuts by the Bank of Canada earlier in the year spurred borrowing, especially in the hot housing markets in British Columbia with all the homes for sale in Mission BC and Ontario”. The great concern now is what happens once interest rates rise to more typical levels. How many Canadian will no longer be able to pay their bills or carry their household debt?

5 reasons why for the increase in Canadian household debt

Why is Canadian household debt at an all time high? In addition to rising mortgage debt it may come down to one simple word – lifestyle:

Credit card spending rose by 8% this year (Moneris Solutions Corp.)

Spending on restaurants and fast food rose by more than 12% (Moneris Solutions Corp.)

Home improvement spending soared nearly 10% in the second quarter of the year compared with the same time last year, led by sales of glass, paint, wallpaper and flooring (Moneris Solutions Corp.)

Furniture sales are up more than 17% (Moneris Solutions Corp.)

Auto loans rose nearly 4% in the second quarter on the back of record vehicle sales (Equifax)

Has income kept pace with Canadian household debt? No!

Unfortunately incomes haven’t increased in the Canadian economy to compensate for the increase in spending and Canadian household debt. A Bank of Montreal report states that approximately 80% of Canadians are in debt and nearly 66% would have trouble affording their household debt if interest rates went up by just two percentage points. Canadians now spend an average 14% of after tax income on their debts. Sadly, the group that’s struggling the most is seniors. According to Equifax, for the first time in five years, 90-day delinquency rates rose among seniors in the second quarter.

What is a person to do?

Are you walking a financial tightrope? If interest rates rise will you be able to afford your household debt? Better yet, would you know how to pay off debt?

Don’t wait for disaster to strike! The time for professional help is NOW. Contact Ira Smith Trustee & Receiver Inc. We’re experts in debt and debt management. We approach every file with the attitude that corporate or personal financial problems can be solved given immediate action and the right plan. Starting Over, Starting Now we can give you financial peace of mind.

The need for credit card debt relief

Debt relief from credit card debt is something we see in our personal insolvency cases all the time. We read in the newspaper and hear in the media about the high level of Canadian debt. Credit cards, after mortgages, are one of the main types of debt being carried.

People always ask us how to reduce debt and the first way is to have realistic expectations about what you can afford. The next way, is not to fall for advertisements that seem too good to be true and require you to input your credit card information for a “free trial”.

I’m sure you’ve heard the expression, “There’s no such thing as a free lunch”; that may be true for free trials as well. These so called free trials most commonly incur what we call “grey charges”. Grey charges are big business and responsible for big debt. According to Aite Group, there are 233 million grey charges a year, amounting to $14.3-billion (U.S.).

What are grey charges?

Free-to-paid are the most common grey charges. You sign up for a free trial period (typically a magazine or online service subscription) after which it becomes a paid subscription if you forget to cancel by a certain deadline. How many people forget to cancel by the deadline? There are over 115 million free-to-paid transactions a year, adding up to over $6 billion, according to Aite Group.
Phantoms are extra products and services added onto another transaction.
Zombies are subscription fees continually billed to you even after cancellation.

We are seeing more grey charges creeping into credit card debt requiring overall debt relief.

Why are they called grey charges?

They’re called grey charges because although they’re legal, they are morally in a grey area.

These grey charges can go on year after year and all the while you’re accumulating debt. “Nine out of 10 people don’t check their credit card charges carefully,” says Mick Weinstein, vice-president of software company BillGuard. “And even if they do, it’s too time-consuming to dispute those charges. So most people simply let them go.”

So the first avenue to obtain debt relief, is to look at all your credit card charges closely and take the time to dispute the ones that do not look authorized.

Four ways to catch grey charges

Don’t be on auto-pilot when it comes to your finances. Take action against grey charges with these 4 tips.

Check your credit card statements carefully each and every month. These may seem like small charges, but they can add up and hurt you.
Don’t sign up for free trials. Remember, there’s always a hook. So if you wouldn’t pay monthly for it, don’t sign up. There is no such thing as a free lunch.
If you do sign up for a subscription, make sure you read the fine print. You need to understand exactly what your financial obligation is.
Check for phantoms. You may be paying for features you don’t want or need.

Serious debt requires serious professional help

Debt is serious business that requires the help of serious professionals. If you’re struggling with debt and are in need of debt relief, contact the Ira Smith Team as soon as possible. We’re a full service insolvency and financial restructuring practice serving companies and individuals throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now. We have helped many individuals obtain the debt relief they so desparately require. Take the first step towards financial freedom today.