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The Québec Consumer Protection Office (OPCQ) increased the credit card minimum payment rate by half a percentage point. Bringing minimum payments on credit card debt from 4% to 4.5%, effective as of August 1, 2022. The OPCQ aims to continue raising the minimum payment rate to 5% by 2023. 

The increase will be applied to those who had a credit card prior to August 1st, 2019 and whose minimum payment percentage was set to 3.5 % or less. Those who opened a new credit card account after August 1st, 2019 are already required to make minimum payments of 5% on their monthly balance. As inflation continues to rise, the minimum payment increase has left many in the province questioning how it will impact their finances. Loans Canada takes a closer look at what you can expect. 

Why Do Credit Card Minimum Payments Increase?

According to Equifax’s June 2022 report on non-mortgage consumer debt in Canada – the average monthly spending on credit cards in Canada has gone up 17.5% in the first quarter of 2022. The report notes that Ontario saw the largest increase, followed closely by Québec currently at 18.4%. Equifax theorizes that high levels of inflation and easing of COVID-19 restrictions have led to record high levels of credit card spending. But data also indicates that Canadian lenders are offering higher credit limits to consumers on new credit cards. The current average credit limit on new cards reached a seven-year high at more than $5,500.

The OPCQ, responsible for setting regulatory standards around consumer credit in Québec, notes that the August 2022 measures are part of the 2017 strategy by the National Assembly to prevent debt problems within the country. The increase is an effort to reduce consumer debt and build consumer consciousness regarding revolving debt fuelled by credit cards

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How Will Québec’s Increase Of The Credit Card Minimum Payment Affect Me?

To learn more about how the increase in the minimum payment requirements on credit cards might affect you and your finances, take a look at our list of pros and cons. 

Pros

Length Of Debt 

One of the positive aspects of higher minimum payments is that it allows individuals to repay their debt in a shorter period of time. 

For example, if you owe a balance of $1,000 on your credit card that has a 19.90% interest rate with a minimum monthly payment of 3.5 %, the remaining balance after payment stands at $927.95. So, paying a minimum of 3.5 % on $1,000 means that it will take you nine years and nine months to pay it all off. 

If your minimum monthly payment was raised to 5% or , then the total amount of time 

Thinking Critically About Your Spending

Higher minimum payment requirements on credit cards are a strategic tactic used by the OPCQ in order to reduce credit card debt. By raising the minimum repayment amount, the OPCQ hopes that Canadian consumers will be encouraged to take a closer look at their credit card dependencies and balances. 

For many, paying their credit card’s minimum payment is a struggle, an increase to the minimum payment may seem counterintuitive in improving financial literacy and habits. However, the ultimate goal is to encourage people to either pay off a larger amount each month or their full balance. Why? Because doing so allows credit card holders to avoid added charges and penalty fees and those who are struggling can reduce their debt before it becomes completely unmanageable.

Cons

Financial Strain On Those Already Struggling

Although the OPCQ aims to help individuals struggling with debt, the current climate of high inflation with high national interest rates has already put a strain on the average Canadian consumer following the COVID-19 pandemic. For some, credit cards might be the only way to pay for basic necessities and needs. If you’re struggling with managing your debt, reach out to a credit counsellor, your bank, or your creditors and lenders to see what options are available to help you better manage your debt. 

Can Negatively Impact Credit Score

If you’re financially strained, a high minimum payment can make it even harder for you to stay on top of your bills. Missed or late payments typically result in further charges and fees, and in some cases might even result in your credit card being cancelled. Your credit scores may also be negatively affected and eventually lead to further financial hardships if you are looking to access other forms of credit. If you are struggling to make minimum payments, consider seeking out a debt or credit counselling service. Exploring different forms of debt relief can help you mend your finances before your credit scores take a toll.

Curious about what the minimum wage is in Quebec?

How Are Credit Card Minimum Payments Decided?

Your minimum payment is the smallest payment you can make on your credit card in order to keep your account in good standing and avoid being charged added fees for missed or late payments. However, keep in mind you will still be charged interest on the balance you do not pay off. In Canada, most credit card providers calculate your minimum payment based on one of two formulas.

Flat Dollar Amount

If you have a relatively small unpaid balance (say, less than $1000), your credit card’s minimum monthly payment might be a flat rate, usually $10, sometimes plus interest and any unpaid fees.

Percentage Of Overall Balance

If you have a larger balance, for example, $5,000, your credit card’s minimum monthly payment will likely be a percentage of the outstanding balance, usually 3%.

How Much Of My Credit Card Balance Should I Pay Each Month?

Don’t wait for your credit card bill. Make payments as early and as often as possible to reduce your interest charges. 

For example: Here in the chart below, let’s say you have a balance of $1,000 on your bill with a monthly minimum payment of 3% and an annual interest rate of 18.00%. The length of time it would take to pay off your balance would be 10-years. On the other hand, if you were to make regular payments of $100 a month, you would be able to pay off your credit card debt in just under a year. Plus, you would also be saving $792 in interest when you pay $100 versus just the minimum payment.

Option A: What if you only make the minimum payment of 3% each month?Option B: What if you make the minimum payment of 3% plus an additional $30 each month?Option C: What if you pay a fixed amount of $100 each month?
Original Balance$1,000.00$1,000.00$1,000.00
Amount Paid Monthly3%3% + $30$100
Total Paid$1,798.89$1,193.29$1,091.62
Total Interest Paid$798.89$193.29$91.62
Time to pay off10 years 2 years and 2 months11 months
Amount Saved$605.6$707.27
Time Saved7 years and 8 months9 years

Frequently Asked Questions

What happens if I only make the minimum payment on my credit card?

It’s important to pay at least your minimum monthly payment to keep your credit card account in good standing. However, only paying the minimum on your balance further prolongs the duration of your debt and you’ll end up paying a lot more in interest.

Is bankruptcy the best way to consolidate credit card debt?

Bankruptcy is a last resort option. It helps consumers with large amounts of debt start over from scratch when they can’t afford to pay off their debt. In Québec, a bankruptcy stays on your credit report for 7 years. There are many other forms of debt relief that can help you deal with credit card debt, including debt consolidation programs, credit counselling, and consumer proposals.

Does making only minimum payments affect my credit score?

Only making minimum payments may have a negative influence on your credit utilization, which is a component used to calculate your credit score. Credit utilization measures how much debt you owe in comparison to your overall credit limit. The more of your credit limit you use, the greater your debt burden and credit usage. 

Bottom Line

Ultimately, higher minimum monthly payments for credit cards will make it more difficult for many consumers to keep up with their credit card balances. To combat this added financial burden, it’s important for Canadian consumers to create a plan of action for dealing with their credit card debt. For those who are struggling the most, consider speaking with a trusted debt or credit counsellor to assess what your options are. 

Maidina Kadeer, BA avatar on Loans Canada
Maidina Kadeer, BA

Mai Kadeer is a graduate of Concordia University, with a BA in English Literature, with a minor in Law and Society. Mai was a student strategist on the Concordia University Senate (2016), through the Academic Planning and Priorities committee. She has a background in financial budgeting as a board member for non-profit organizations, such as the Quebec Public Interest Research Group and the Concordia Food Coalition. For the past five years, Maidina has worked as a content specialist. Mai is passionate about helping Canadian consumers with financial management and literacy so they can make informed decisions regarding their personal finance.

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