Cash Is Not King

Does an increase in credit use lead to financial difficulty?

Cash Is Not KingCredit is king for most Canadian consumers!

Despite continued reports of soaring debt levels, the Canadian consumer’s dependence on credit continues to increase, according to a recent report from The Bank of Canada.

According to the central bank’s recently-released Use of Cash in Canada report, Canadian consumers are increasingly turning to credit over cash and debit cards to make their purchases.

The study has found that:

  • Cash accounts for 44% of retail transactions;
  • The use of cash in retail transactions has declined 10% since 2009;
  • Debit card use in retail transactions has decreased in both volume and value since 2009; and
  • The volume of retail credit card transactions has increased 11% since 2009.

With Canadians carrying record-high levels of consumer debt, this increase in credit card use is very concerning for Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada.

“Every day we speak with people who have buried themselves under a mound of credit card debt,” says Schwartz.  “Canadians are struggling to make ends meet, yet continue to rely on credit to satisfy their consumer wants.”

“Consumers need to break this cycle of ‘I see it, I want it, I buy it’,” continues Schwartz. “Simply put, if you don’t have the cash on hand to make a purchase, there is a solid chance you really don’t need it.”

For Schwartz and the team at Consolidated Credit, this report is a warning sign that many Canadians may be in financial crisis, but may not recognize the signs of a debt problem.

To help those who may be teetering on the edge, Schwartz offers these warning signs of a credit crisis:

  • You can’t pay your credit card bills – One of the first signs of a debt problem is the inability to pay your balances in full each month. If you are spending more than you are able to pay, it is time to sound the alarm bells.  The first bill that you cannot pay in full should be your first warning sign.  You may not be in financial crisis now, but it is easier to overcome one month of overspending than trying to solve months or even years of compounding debt.
  • Credit has become a necessity. When you use credit for convenience you should be able to pay the debt in full each month. But if you are relying on credit because you don’t have money in your bank accounts, there is a good chance that you have crossed the line into necessity. At this point you are relying on credit to get by, and probably getting close to your tipping point.
  • Your debt keeps growing. Have you noticed an upward trend in your credit card debt? If your balances continue to rise each month, there is a good chance you are in credit crisis, or at the very least on the road to a financial fall.
  • Just making the minimum each month. Only making the minimum payments each month is a sure sign of financial distress. Taking the easy route of only paying the minimums may keep your creditors off your back (for now), but will do very little to decrease your debt load.  If you can only afford to make the minimum, it’s time to put away the credit cards and start paying down that debt.
  • You think about your finances daily. Has money become a constant stress in your life? If concerns about paying monthly bills have started to consume your daily life, there is a good chance that your debt dependence has become a credit crisis.
  • You’re robbing Peter to pay Paul. You have likely heard this saying, but simply put, it means transferring balances from one card to another. It’s one thing to pay off one card in order to take advantage of the lower interest rate on another.  However, if robbing Peter to pay Paul has become a financial lifestyle for you, you’ll be better served finding ways to pay them down rather than looking for another card.


If any of these warning signs have become a way of life for your finances, you may be headed for a financial free fall.  When debt becomes too much to handle, we can help! Give us a call at 1-888-294-3130 today to speak to a trained credit counsellor and find out how you can get your budget under control.  You can also try our Free Debt Analysis online and a counsellor will reach out to you.

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