As interest rates began receding and tax refunds rolled in during the second quarter, Canadian households did a better job keeping up with their credit card obligations, Fitch Ratings reports.
In a research note, the rating agency said Canadian credit card delinquencies and charge-offs in Q2 declined from recent highs.
The three-month average for card balances that are over 60 days past due fell to 1.12% in the second quarter, down from 1.22% in the prior quarter, Fitch said.
The decline represented a reversal after three consecutive quarters of rising delinquencies.
Additionally, net charge-offs eased and the monthly payment rate rose to 58.25%, “recovering from a recent low of 53.54% over the same period,” Fitch reported.
Consumers aren’t out of the woods just yet.
“Despite improved credit card performance over the second quarter, household finances remained stretched due to growing debt balances, higher prices and elevated debt servicing costs,” the report said.
As the economy continues to cool and labour markets weaken, Fitch said it expects weaker card performance for the rest of the year.
Both trends “would increase pressure on households to manage finances and meet payment obligations,” the report said.