Despite softening labour markets, households largely kept up with their credit card balances in the third quarter, Fitch Ratings says.
In a report released Friday, the rating agency said Canadian credit card performance “remained stable” across key metrics in the third quarter, compared to the previous quarter.
“Delinquencies and charge-offs either remained unchanged or decreased from the last quarter,” Fitch reported.
For instance, the three-month average for late-stage delinquencies, defined as balances that are at least 60 days past due, came in at 1.12%, which was unchanged from the previous quarter, and is slightly below pre-pandemic levels, the agency said.
At the same time, the net charge-off index was also essentially unchanged at 2.91% in Q3, compared with 2.93% in the previous quarter. However, this was up from 2.47% in the same quarter in 2023, Fitch noted.
“Although credit card performance remained stable in the third quarter, household finances were still under pressure from a cooling labor market, rising debt balances, higher prices, and a widening wealth gap,” the agency said.
These ongoing stresses were reflected in Fitch’s Monthly Payment Rate Index, which averaged 57.76% in the third quarter, down from 58.25% in the previous quarter.
“This decline was attributed to more cardholders revolving balances and relying on credit cards to manage their finances,” Fitch said.
Looking ahead, with inflation easing and interest rates declining, Fitch said it expects credit card performance to remain stable for the rest of 2024.