COVID-19 Financial Impact on Canadian Consumers: Week 4

The COVID-19 pandemic is creating major economic and financial distress for consumers across the globe. Millions of Canadian jobs are either affected or at risk. To help organizations make decisions at a time when information on consumer impact is still emerging, TransUnion is conducting weekly surveys to better understand consumers’ perceptions and expectations in this rapidly evolving situation. Here are the main findings from the survey conducted in week four.

Consumers cutting back to keep going

Over 60% of impacted consumers indicated they’re spending less on entertainment and eating out, while 30% have cancelled subscriptions and memberships, and over 20% have cut back on retirement savings.

They’re also delaying purchases — particularly vacations and holidays (52%), home improvements (27%) and auto purchases (19%).

Fifty-nine percent say household income has been impacted

Data collected May 4–5 shows under three in five (59%) Canadian consumers say they’re currently financially affected by the COVID-19 health crisis, unchanged from week three. Millennials seem to be most vulnerable as 72% still claim they’re negatively affected.

Consumers seem to be more confident about the future and their survival plan through the crisis. This is likely due to a combination of policy support and bank forbearance programs, and consumers making the necessary adjustments as they get used to a new normal.

Sixty-five percent affected by reduced hours or job losses

Of the 59% of Canadians financially affected by COVID-19 (unchanged from week three):

• Twenty-nine percent indicated this was due to a reduction in working hours (30% in week three)
• Twenty-five percent stated they’d lost their job (unchanged from week three)
• Eleven percent were small business owners reporting a loss of income or having to close (unchanged from week three)

Sixty-seven percent concerned about ability to pay bills and loans

This number is up slightly from the previous week (66%), with reports showing:

• Close to half of those impacted now think they can go one to three months before not being able to pay bills (45% in week three)
• Six percent of those impacted said they won’t be able to pay bills within the next week (8% in week three)

Impacted Canadians said they will not be able to pay:

• Credit card debt (48%; down from 51% in week three)
• Auto loans (21%; down from 23% in week three)
• Personal loans (19%; unchanged from week three)
• Medical bills (11%; up from 9% in week three)

Subsidies, deferral programs and consumers’ ability to manage finances through the crisis are likely contributing to an overall improvement, albeit slight, in being able to pay essential bills.

Budget shortfall is C$951.00

On average, consumers who are affected expect they’ll be short by C$951.00 (down 8% from C$1,035.20 in week three) when paying bills or loans. With the exception of Gen Z, all generational cohorts indicated the amount they’d be short is now less than previous weeks. Gen Z increased by 7% to $916.70. Impacted consumers expect they’ll not be able to pay their bills or loans in 7.3 weeks (6.6 weeks in week three).

As a result, consumers are turning to withdrawals from savings and retirement accounts to offset shortfalls. This is a concern as it may affect retirement and overall net worth.

• Twenty-three percent plan either to borrow money from a friend or family member (22% in week three)
• Twenty-two percent are turning to using money from tax-free savings accounts or registered retirement savings plans (down from 28% in week three)
• Nine percent say they’ll take out personal loans for short-term liquidity (unchanged from week three)
• Thirteen percent plan to refinance or renegotiate current payments/rates with their financial institution (up from 9% in week three)
• Nineteen percent say they don’t know how they’re going to pay (up from 18% in week three).

To date, just over two in five impacted consumers (43%) have reached out to the companies they have accounts with to discuss options.

Gen Z fraud victims almost double

While the overall proportion of responders targeted by fraud has dropped from 28% to 25%, there’s been an increase in those who acted and became a victim of a fraud scheme.

This is more prevalent among younger consumers: Gen Z responders who are victims nearly doubled from 8% to 14%, likely because they’re more comfortable transacting digitally than other generations.

Thirty-three percent check credit scores at least once a month

The number of consumers checking their credit scores daily has risen slightly.

Younger generations are more likely to monitor their scores, with nearly half of Gen Z consumers checking at least monthly. Because these consumers are more digitally engaged, they’re likely using the free monitoring services provided by many lenders online and are getting monthly updates pushed to their devices.

Of those that do monitor their credit score, half are taking advantage of the free monitoring services provided by lenders.
 

Additional resources:
We’ve developed several resources to assist businesses and consumers navigate this difficult time. To learn more about our weekly consumer research and download the latest reports and infographics, visit https://www.transunion.ca/financial-hardship-study.