With the Bank of Canada expected to increase interest rates soon to curb inflation, consumers with heavy debt loads need to reconsider their financial strategy.
That's the message from New Westminster-based Credit Counselling Society of B.C., which is warning that consumers financing their spending habits with debt might quickly find themselves in a pinch come Christmas.
The Bank of Canada raised its overnight rate by 25 basis points to 4.5% with the bank rate rising to 4.75%. Bank of Canada governor David Dodge said July 12 that stronger than expected inflation of about 3% might trigger another interest rate increase later in the year.
Because of the prospect of higher borrowing costs, the CCS recommends consumers re-evaluate their budget and personal finances and reduce their dependence on lines of credit and credit cards to supplement their income or defer costs in the future.
According to Statistics Canada, more than $321 billion in consumer credit was granted through Canada's financial institutions in 2006, a 27% increase from the amount of debt issued in 2003.