Gen Zs are showing some risky behaviour according to new report
Canadians’ consumer debt mountain continues to escalate with a combined $2.5 trillion owed, a new record high following year-over-year growth of 4.5% in the fourth quarter of 2024.
A new report from TransUnion reveals that the growth of outstanding credit balances was driven by increases in mortgage and non-mortgage products. A 5.8% year-over-year rise in non-mortgage debt included a 4.2% increase in line of credit balances and 9.2% for credit cards.
Credit cards have been a particular concern in recent months, showing up as a key factor in insolvencies.
Millennials and Gen Zs held a combined $1.1 trillion in outstanding balances, up 10% year-over-year. Gen Zs increased their credit participation the fastest as they expanded beyond credit cards. Across all age groups credit participation was up 2.5% with more than 32 million Canadians having at least one credit product. Reduced interest rates and inflation was one of the drivers.
But the report warns that the health of the Canadian consumer credit market, as measured by TransUnion’s Canada Consumer Credit Index, declined to its lowest level since 2021 (99.8) in the fourth quarter, while December’s reading was the lowest since 2020.
Delinquencies rising
With delinquencies a concern, lenders have been tightening their criteria, which has brought down the pace of credit card originations. Balances for these products are also beginning to stabilize with average credit card debt per borrower at $4,681 in Q4, up 6% year-over-year. But this growth rate was down from 7.2% year-over-year in Q4 2023.
The number of non-bankcard delinquencies reported has increased even though economic conditions, notably employment, are relatively stable.
Overall serious consumer delinquency continues to rise on a year-over-year basis, up 16 basis points to 1.83% and reaching a five-year high, back on par with the pre-pandemic levels. Gen Zs are driving this increase.
"As the Canadian credit market expands, Gen Z consumers present a significant growth opportunity for lenders, especially through tailored credit card offerings,” said Matthew Fabian, director of financial services research and consulting at TransUnion Canada. “Gen Z are educated and active credit users with a growing propensity to utilize credit throughout their lifecycle. Early management is crucial, as credit cards can be a valuable financial tool for Gen Z when managed responsibly. By implementing strategies such as education and regular credit monitoring, credit cards can become an asset rather than a financial burden for Gen Z consumers, creating loyalty to lenders who provide those services."
