Credit Canada has warned that Canadians are encountering a triple spell of financial hardships due to holiday spending, COVID-19 deferral payments and taxes on relief funding.
Credit Canada has witnessed a surge in demand all over Canada from people seeking financial advice as credit card bills pile up.
Credit Canada’s Communications Manager, Adriana Molina, said Canadians would be seeking to pay off holiday debt on top of any deferral payments acquired amid the pandemic over the next two months.
Also, some Canadians may have to pay federal government if they got money from the Canada Emergency Response Benefit (CERB), a taxable benefit program. The amount owed by individuals depends on their total income for year 2020.
Molina said: “Canadian consumers are getting hit in three different ways financially around this time of year.
“If you’re in that lower (tax) bracket, low to middle income … that’s the bracket that’s going to be hit the most because now they’re probably going to have to pay taxes on CERB. People that were in low to middle income are the people that were most likely going to take those payment deferrals as well. Now that those payment deferrals might be ending, creditors might be aggressive in terms of getting those payments back.”
She said a lot of Canadians did not realize their interest rates were increasing during their deferral periods and that some people may have discovered they reached their credit limit as a result this, which put them in a higher interest rate bracket.
She said, Credit Canada has recently heard more stories of creditors requesting for every deferral payment at once including those that have been deferred for years. According to her, in a case, someone was trying to collect a 30-year-old debt.
Molina said: “A big number of people are reaching out to us for advice and for information, which is wonderful, but … we’re seeing people actually not taking much action when it comes to managing their debt or paying off their debt or at least addressing their financial obligations.
“We’re finding people are holding onto their money because they don’t know how much money they can expect to have in the coming months. It’s kind of making their financial situation much worse.”
She disclosed there are options for those that want to dig themselves out of their current financial condition. For beginners, she recommends creating a budget, which Credit Canada can help with via its free counselling sessions. Also, Molina suggests making debt payments as soon as possible and avoid taking credit whenever possible.
