Psychology of debt: Young Canadians “freaked out” by principal, seniors more concerned about interest: survey

Credit Canada launches Debt Calculator to help save money on interest

TORONTO, Sept. 11, 2018 (GLOBE NEWSWIRE) -- A new national survey from Credit Canada shows that young Canadians are more likely to be “freaked out” by their debt, rather than the interest on that debt. But as people age the response changes and seniors are more likely to be concerned about the interest rate itself.

The Debt Awareness Survey – a newly released Leger poll of 1,517 Canadians sponsored by Credit Canada asked, “what freaks you out more” debt or interest? Across all ages debt principal (at 42%) edged out interest (at 34%).

Here is the demographic breakdown, which shows the trend as respondents get older:

What freaks you out more, amount of debt or interest on the debt?

  • The 18-34 cohort is much more likely to be "freaked out" by the amount of debt (50%) than the amount of interest (26%)
  • Those 35-44 significantly more likely to be "freaked out" by the amount of debt (45%) than the amount of interest (31%)
  • At ages 45-54, Canadians are slightly more likely to be "freaked out" by the amount of debt (42%) than the amount of interest (39%)
  • Those 55-64 are slightly more likely to be "freaked out" by the amount of debt (38%) than the amount of interest (36%)
  • Seniors (65+) are most likely to be "freaked out" by the amount of interest (42%) than they are by the amount of debt (29%)

The survey also found that while two-thirds (65%) of Canadians with debt are aware of the total amount they owe, that awareness drops significantly when it comes to interest. Less than four-in-10 Canadians with debt (38%) know how much they are paying in monthly interest while nearly the same number (42%) know the interest rates on their existing debts.

Canadians gain “an interest” in interest as they age
The findings by age category also show a trend towards interest-rate awareness as people age. The 18-34 demographic is twice as likely to know their total debt (59%) than they are to know the interest rate on their debts (30%) or their monthly interest payments (29%). Meanwhile, seniors (65+) are most likely to know their total debt (75%), the interest rate on their debts (55%) and their monthly interest payments (45%).

Debt repayment awareness is low across the board
Finally, overall (all ages) awareness is low around the issue of debt repayment. Only one-in-three Canadians with debt (34%) know “how long it will take to pay off their debts making fixed payments” while just 27 per cent know how long it will take making minimum payments.

“While millennials ranked the lowest when it came to knowing how much debt they owe and how much interest they’re paying, overall awareness is low across the board among all ages, which is alarming to say the least,” said Laurie Campbell, Credit Canada CEO.

Debt snowball vs. avalanche
A recent blog by Credit Canada discussed the repayment concept of snowball vs avalanche. The snowball method involves paying as much money as possible towards the smallest debt, regardless of the interest rate, while maintaining just the minimum payments on other debts. Once the smallest debt has been paid off, payments are rolled over into paying down the next smallest debt and so on. This way, a person knocks off debts one by one, and the payments “snowball” into faster debt repayment.

Conversely, paying down debt with the highest interest rate first is known as the avalanche approach – this involves maintaining the minimum on all debts, but paying the most money possible towards the debt with the highest interest rate, regardless of how much money is owed. This in the long-run may save hundreds, if not thousands of dollars in interest charges.

The psychology of debt: calculator helps show which method is right for the individual
Credit Canada has launched the country’s first snowball vs avalanche Debt Calculator to help consumers figure out which way is fastest for them. In the end, it usually comes down to personality. While the avalanche method is likely to save money in the long-run, many prefer the snowball method because paying off the smallest debts first achieves quick upfront wins, which can be a motivating factor for some and helps them stay on track with their debt repayment.  A study from the Journal of Consumer Research suggests the snowball method is more likely to succeed because of the psychological benefits and instant gratification related to paying off a debt balance in full faster.

Debt consolidation
Credit Canada’s Debt Calculator is helpful for consumers looking for the best of both worlds (paying off debt faster and saving on interest). The tool calculates how long it will take to pay down debt, as well as how much interest you will pay making minimum payments, fixed payments (snowball and avalanche methods), acquiring a consolidation loan to pay off your debt, as well as a fourth option – Credit Canada's Debt Consolidation Program.

“Whatever method people choose, it’s important to remember, the only wrong way of repaying debt is to not pay it,” said Campbell.

The full results of the Debt Awareness Survey can be found here.

About the Debt Awareness Survey 
Leger conducted a survey of 1,517 Canadians between July 27 and July 31, 2018 using its online panel, LegerWeb. A probability sample of the same size would yield a margin of error of +/-2.5%, 19 times out of 20. Leger’s online panel has approximately 475,000 members nationally – with between 10,000 and 20,000 new members added each month and has a retention rate of 90%.

About Credit Canada
Credit Canada is a non-profit and charitable organization providing free and confidential credit counselling, personal debt consolidation and resolutions, as well as preventative counselling, educational seminars, and tips and tools in the areas of budgeting, money management, and financial goal-setting. Credit Canada is Canada’s longest-standing credit counselling agency, helping Canadians manage their debt since 1966. Please visit for more information.

Snowball vs avalanche debt calculator
Debt consolidation options for Canadians

Contact for more information
Lyndsay Wallis, MAVERICK
Office: 416-640-5525 x 240
Mobile: 226-979-6941

Photos accompanying this announcement are available at:

Laurie-Campbell Credit-Canada-Debt-Consolidation(1) Credit-Canada-Debt-Consolidation(2) Credit-Canada-Debt-Consolidation(3)