Minimum payments on credit cards increasing in Quebec starting Monday

A major change in the rules for paying off the minimum payment on a credit card balance goes into effect this Monday.

People who had a credit card prior to Aug. 1, 2019 and whose monthly minimum payment percentage was set at less than 3.5 per cent must now make a payment each month that is equal to 3.5 per cent of the balance owing indicated on the statement.

This change is effective until July 31, 2023, and will be followed by a few other adjustments.

The Quebec consumer protection office (OPCQ) said that as of Aug. 1, 2023, the credit card issuer must require a minimum payment of at least 4 per cent of the amount owing. This percentage will be increased to 4.5 per cent one year later, on Aug. 1, 2024, and to 5 per cent on Aug. 1, 2025.

The OPCQ points out that the Consumer Protection Act sets out the percentage of the minimum payment that may be required. In fact, people who have held a credit card contract since Aug. 1, 2019 already have a minimum payment to make each month that must correspond to at least 5 per cent of the balance owing.

On the other hand, a credit card issuer has the right to require a minimum payment of more than 3.5 per cent of the balance, if the contract already provided for it. However, the issuer may not do so if the contract has been modified without the cardholder’s consent to exceed 3.5 per cent.

The consumer protection office advises that it is always better to pay the balance on the credit card each month to save on credit fees. Paying the minimum payment each month makes the debt repayment low.

For example, if a person makes a $1,000 purchase with his or her credit card that has a 19.90 per cent interest rate and only pays off the minimum monthly payment of 3.5 per cent of the balance owed, the credit fee will be $927.95. It will take him nine years and nine months to pay it all off.

Last June, a report from credit analysis firm Equifax Canada noted that Canadian consumers are using their credit cards. Average monthly credit card spending was up 17.5 per cent in the first quarter of 2022 compared to the same period last year. The largest increase in credit card spending, 20.4 per cent, was in Ontario, followed by Quebec, where spending increased by 18.4 per cent.

In general, younger consumers increased their credit card spending the most.

Equifax Canada also noted that new card volume increased by 31.2 per cent compared to the first quarter of 2021.

— This report by The Canadian Press was first published in French on Aug. 1, 2022.

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