57% of participants intend to cut discretionary spending and 22% plan to apply for new or refinance existing credit as Canadians appear to be bracing for continued increases in household cost of living, reveals new TransUnion study.
Q4 2023 TransUnion Canada Consumer Pulse study key findings:
- 43% report that their household finances are worse than planned in Q4.
- 43% feel optimistic about household finances over the next 12 months; 57% are not feeling optimistic.
- 48% expect household income to remain the same over the next 12 months, 41% expect an increase, and 11% expect a decrease.
- Of those who said they’d be unable to pay at least one of their current bills and loans in full, 23% indicated they will use their credit card or open a new credit card to help pay their bills and loans.
- 33% expect their bills and loan repayments to increase over the next 3 months.
- 39% of Gen Z and 35% of Millennials plan to apply for new credit or refinance existing credit.
- Overall, 88% believe monitoring their credit report is important.
TORONTO, Jan. 09, 2024 (GLOBE NEWSWIRE) -- TransUnion’s most recent Consumer Pulse study* shows that almost half (43%) of Canadians surveyed felt their household finances are worse than planned, up two percentage points from Q3 2023. This compares to 57% who felt their household finances are as planned or better (Gen Z was the highest among generations at 70%). While more than half (59%) overall said their household income stayed the same in the last three months, 21% reported it increased and 19% said it decreased in that time period. Despite the steady pace or increase in household income for the majority of Canadians, TransUnion data shows a continued shift in spending and saving behaviours which appear to be fueled by the impact of the prevailing cost of living pressures on disposable income and buying power.
The study also indicates that Canadians are preparing for a possible recession by reducing spending (57%), building up savings (36%), paying down debt (31%). At the same time, Canadians’ report that access to credit and lending products is important to achieve their financial goals (86%).
“The impact of higher interest rates and cost of living created increased vulnerability among Canadians,” said Matt Fabian, director of financial services research and consulting at TransUnion Canada. “Consumers are forced to make trade-off decisions on how to allocate their disposable income in a more expensive environment. While Canadians remain resilient, many consumers report that bills and loans are more difficult to cover, which could lead to interest charges. Overall, Canadians are spending less, saving where they can, and turning to credit to help manage their household income cashflow.”
While Canadians remain resilient in the face of the prevailing economic headwinds, financial pressures are impacting Canadians use of credit, spending and saving behaviours. TransUnion’s Q4 Consumer Pulse study shows:
Shifts in Canadian household spending.
- Reduced discretionary spending (e.g., dining out, travel, entertainment) in the past three months (57%) versus 9% who increased discretionary spending.
- Cancelled subscriptions or memberships (25%) versus 7% who increased subscriptions or memberships.
- Cancelled or reduced digital services (19%) versus 6% who added digital services.
Changes in managing debt or credit.
- Paid down debt faster (19%).
- Increased usage of available credit (14%).
Changes in saving.
- Saved more money in an emergency fund (21%).
- Cut back on retirement savings (16%).
- Saved more for retirement (10%).
- Used retirement savings (8%).
Canadians have polarizing view on financial outlook.
When it comes to the level of optimism Canadians feel around their financial outlook, the study revealed there are contrasting views. Despite the prevailing financial pressures, 43% of Canadians feel optimistic about their household finances over the next 12 months. Conversely, 57% of Canadians are not feeling optimistic about their financial outlook. Gen Z feels the most optimistic among generations at 61%, followed by Millennials (47%). Gen X and Baby Boomers were significantly less optimistic at 36% and 37% respectively. Overall, the study indicates that 48% of Canadians expect household income to stay the same over the next 12 months, with 41% who believe it will increase and 11% who believe it will decrease.
Canadians anticipate household spending pressures will continue.
Looking to the next three months, the study shows that many Canadians anticipate a continued shift in household spending likely influenced by continued financial pressures and cost of living pressures, including:
- Bills and loans: Increase (33%), same (49%), decrease (13%).
- Digital services (e.g., wireless, cable TV, internet): Increase (17%); same (58%); decrease (20%).
- Discretionary spending (e.g., dining out, travel, entertainment): Increase (13%); same (32%); decrease (50%).
- Large purchases (e.g., appliances, cars): Increase (12%); same (34%); decrease (34%).
- Medical services: Increase (16%); same (55%); decrease (12%).
- Retail shopping (e.g., clothing, electronics, durable goods): Increase (17%); same (40%); decrease (39%).
- Retirement funds and investing: Increase (13%); same (42%); decrease (23%).
Access to credit considered key for vast majority of Canadians.
The study further indicates that financial pressures could be driving the importance of access to credit among Canadians. Overall, 86% of Canadians report that access to credit and lending products is important (an increase of 7 percentage points year-over-year), with 40% who said it was extremely or very important. Around one in five (19%) of Canadians report that they don’t feel like they have sufficient access to credit and lending products, compared to 55% who believe they do.
More than one in five Canadians plan to apply for new or refinance existing credit – with higher rates among younger cohorts.
Overall, around one in five Canadians (22%) report that they plan to apply for new or refinance existing credit within the next year. Demand for new credit is significantly higher among younger cohorts, at 39% for Gen Z and 35% for Millennials.
Canadians plan to take on diverse mix of credit.
Of those who intend to apply for new or refinance existing credit, nearly half (45%) plan to apply for a new credit card in the next year. Among those respondents, other planned credit and loan activity in the next 12 months included:
- New personal loan (24%).
- Refinance mortgage, home loan or bond payment (17%).
- New mortgage, home loan or bond payment (16%).
- New car loan or lease (14%).
- Refinance personal loan (14%).
- New buy now, pay later services (13%).
- New home equity line of credit (9%).
- Refinance car loan (9%).
- New student loan (9%).
- Refinance student loan (6%).
- Refinance home equity line of credit (6%).
Paying the bills is a concern among many Canadians.
While the majority felt confident they could pay their bills, 33% of surveyed Canadians anticipate their household spending on bills and loans will increase over the next three months. Nearly one third (28%) reported they will be unable to pay at least one of their current bills and loans in full (up five percentage points year-over-year). Of this participating group, this is how they said they’d pay their current bills or loans:
- 35% pay a partial amount based on what they can afford.
- 23% use their credit card or open a new one.
- 22% borrow money from friends or family.
- 15% use money from savings.
- 10% take out a personal loan.
Canadians’ focus on monitoring their credit scores.
The TransUnion study further reveals that Canadians have increased their focus on monitoring their credit scores, with 88% believing it is important (an increase of five percentage points year-over-year). This is possibly due to economic volatility driving consumers to be more conscientious of their credit health. Younger Canadians (Gen Z at 91% and Millennials at 94%) had a higher rate, potentially trying to build their credit scores. Around four in ten (41%) of Canadians check their credit scores at least monthly (Gen Z at 65). Among all age groups who said they monitor their credit report, the top reasons cited were: it’s free (46%), to check accuracy (39%), and to protect against fraud (36%).
The complete Consumer Pulse study can be viewed here.
*The most recent Consumer Pulse study includes a survey of 974 Canadian consumers conducted Oct. 3-13, 2023.
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries, including Canada, where we’re the credit bureau of choice for most of Canada’s largest banks. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this by providing an actionable view of consumers, stewarded with care.
Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.
For more information visit: www.transunion.ca
For more information or to request an interview, please contact:
Alex Wilcox
Email: Alex.Wilcox@ketchum.com
Telephone: +1 705-878-6815
