Skip to main content

Canadians are starting 2010 with a bigger holiday spending hangover than last year and shouldering more debt than ever before, even as the economy struggles to gain broad traction and unemployment remains high.

The buying binge comes at a time when households have racked up record amounts of debt and policy makers are warning of rising interest rates, which could make those post-Christmas credit card bills even more sobering.

While higher consumption is exactly what the Bank of Canada wants right now to cement an economic recovery, too much spending could create serious challenges down the road.

Story continues below advertisement

"Human nature still tells us that if you want something, you go and buy it," said Suzanne Schultz, a chartered accountant and certified financial planner with RBC Dominion Securities Inc. "It is a really big change of mindset to spend only what you can afford, and not everyone is good at doing that."

It is a really big change of mindset to spend only what you can afford, and not everyone is good at doing that. Suzanne Schultz, certified financial planner

Canadians certainly dug deeper this December, with spending in the holiday period rising 3.44 per cent in volume over 2008, according to Moneris Solutions, which processes credit, debit and online payments.

And how did Canadians pay for their holiday loot? "At the beginning of 2009, we saw consumers spend more on debit than on credit," Santo Ligotti, director of marketing at Moneris, said Monday. "As we got to September, October, we started to see the credit volume go up, and they've been almost equal."

Unlike many Canadians, Kim McMullen was determined to avoid incurring any credit card debt this holiday season. The 31-year-old Vancouverite, who runs her own graphic design studio, established a holiday budget back in November and pledged to stick to debit or cash for all of her expenses.

"My goal was to not use my credit card … so that I would not be paying interest on anything," she said.

Ms. McMullen, who travelled home to Ontario for the holidays, estimates that she spent $400 or $500 more than she had planned, mostly on treats such as chocolates and wine for dropping in on family and friends. "As of Jan. 1st, I was $16 in overdraft but I don't have a balance on my Visa. I'm happy that I broke even."

The increased holiday spending is a mixed blessing for policy makers. The Bank of Canada slashed interest rates in a bid to revive the economy, hoping that unusually low borrowing costs would spur spending. However, Governor Mark Carney and other officials are now concerned about the pace at which consumer debt is rising, while income growth is lagging. That could cause a bigger headache when rates rise, inflating monthly debt payments for consumers.

Story continues below advertisement

The central bank estimates there was nearly $1.4-trillion in total household credit outstanding in October, the most recent data available, up from $1.3-trillion a year earlier. Much of the growth stems from mortgage debt, which stood at roughly $950-billion in October, compared with less than $890-billion a year earlier. Meanwhile, the number of bankruptcies as a proportion of the population hit its highest level since 1991 in the third quarter.

. Weigh in on whether you would stash some extra money into an RRSP, RESP or a TFSA.

The Moneris tally showed department stores were the clear winners this holiday season, with a 7.12-per-cent gain, while clothing stores saw a 3.52-per-cent increase. Regionally, shoppers in Prince Edward Island led the rest of the country with a 13.84-per-cent surge in spending. Albertans spent 5.75 per cent less.

The biggest year-over-year jump - 7.93 per cent - was recorded Dec. 24 to 29, suggesting that scouring for last-minute markdowns and Boxing Day bargains was rampant this year.

The Interac Association, which runs Canada's dominant debit network, said that its busiest day in December was the 23rd. There were 16.9 million transactions that day, with a total dollar value of $891.7-million. That's roughly 3 per cent higher, in terms of transactions and dollar volume, than the busiest day in December of 2008.

Report an error Licensing Options
About the Author
Personal Finance Web Editor

Roma Luciw is the Globe and Mail’s personal finance editor. She has worked at the Globe as a business journalist since 2001, covering stock markets, breaking news, and most recently anything that helps regular Canadians manage their own money. More

Comments are closed

We have closed comments on this story for legal reasons. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at