Why Alberta has the Highest Consumer Debt in Canada

Alberta Consumer Debt

Photo Credit: Freedigitalphotos.net



Experiencing some level of debt is quite normal and in most cases necessary for Canadians to live full lives with families and careers.

At some point you may say to yourself, I’m going to buy a house, a car and even more, some have families. Children are a huge expense and unexpected costs become a reality as you adapt to parenthood.

Yes, we all know how easily personal debt can be created and accumulated and tough to get rid of. We take on credit card debt, mortgage loans and car leases and do our best to work and stay on top of our personal finances. In recent years, household debt in the homes of Canadians has steadily increased on average and the Province of Alberta has had a spotlight on it ever since.

Related: What pushes people over the edge financially

Today we’re looking at why newspapers and financial journalists have reported for years on the state of debt in this province since its role as an energy exporter in Canada’s economy is unique and the consequences financially have in past years seemed overwhelming.

With the national average household debt ratio quite high in Canada, some reports have focused on which provinces are contributing most to these alarming numbers. Alberta stands out with the highest debt levels year after year. What gives?


How Does Alberta Fit into Canada’s Average Household Debt?


While the top banks in Canada continue to experience profit gains, Canadians themselves are having an increasingly difficult time keeping up with ballooning debt levels. Many of us get up and go to work everyday and yet simply owning a house or having a family can keep us weighted down with debt.

Household debt is now up to 163% of disposable income! That’s alarming to say the least and it’s certainly not because Canadians aren’t working hard enough.

Related: Why clearing debt is like dieting

Remarkably, 90% of Canadians feel that their current earnings can’t keep up with their cost of living, says Economic Advisor to the new Liberal Government Bill Morneau. Canada’s national average consumer debt has risen 2 percent this year to $21, 164, but the debt level between Canada’s provinces is far from equal says a report by Equifax, featured in The Calgary Herald earlier this year.

The Province of Alberta in particular gets called out for having the highest average consumer debt provincially, with a total of $28, 226. While this average reveals a slight drop from the $28, 280 last year, the significant discrepancy between Alberta and the national average begs the question as to why this provincial-consumer-debt phenomenon is taking place.


How Do Other Provinces Stack Up?


What causes variations in average debt levels on a regional level? I imagine that the identity of each provincial region in this great country certainly plays a role in how patterns of debt shape and form on a local level. Since Canada is vast, the natural resources are not geographically condensed and some regions experience much richer exports than others.

To get an understanding of what’s happening on a provincial level regarding consumer debt levels, it’s useful to break down each region separately. In the image below we see that Atlantic Provinces have combined a very low-level of debt, while Alberta has experienced a trend in high consumer debt in recent history. Since the data below is from 2012, we can conclude that Alberta’s high consumer debt has persisted:

CBB Guest Infographic Alberta Debt load

Image Source: Screenshot of Infographic from Loan and Go Resources
What’s interesting is that other provinces have experienced fluctuating levels of consumer debt on average, while Alberta has remained stable as experiencing the highest. For example in the image above we see that the combined average consumer debt of both Manitoba and Saskatchewan was $10 488 in 2012, yet Saskatchewan now has the second highest provincial consumer debt average at $23, 347, all by itself not including Manitoba.

What causes these fluctuations and why is Alberta always at the top of the consumer debt list?


What is the Reason for Alberta’s Consumer Debt Problem?


In August of 2014, Global News reported that the Province of Alberta is relying more on consumer credit than any other province in Canada and reported that their consumer debt average had risen an alarming 40% since the previous year.

This high level of debt is shocking to some considering that the average hourly wage in Alberta is $28.14 (I remember working for a minimum hourly wage of $6.00 way back when!). Naturally, most of Alberta’s consumer debt comes from credit cards, mortgages and student loans.

Related: How to tackle financial fears so you have no regrets

Does that mean that Albertan’s are carelessly spending their unusually high earnings? What does that mean for the province? Jeff Schwartz of Consolidated Credit Counseling Services of Canada says that Albertan’s are increasing their reliance on debt and the consequences could be serious.

The Senior Director at Equifax Canada, Regina Malina, discusses the reasons why Alberta leads the consumer debt pack year after year.

Alberta traditionally had higher income, lower unemployment and , therefore, high consumer confidence. In addition their delinquency rate was low. Under these conditions it is not surprising that their average debt was higher.

The oil economy locally in Alberta likely has played a central role for the high consumer confidence Malina refers to. CBC reporter Patti Edgar, says this consumer debt is the hangover after years of optimism and confidence in the provincial economy.

I guess it went something like – oil is here to stay, get a good job in the energy sector, get a big house, take on a few credit cards knowing you can pay it all off…then the energy sector becomes vulnerable because it can certainly be unstable and all of a sudden there is high consumer debt problems.

However Alberta’s high consumer debt may be slowing down after years of climbing out of control. Meaning the hangover may be wearing off. Reporter, Gary Marr, writes in the Financial Post that for the first time in years, Alberta’s consumer debt has started to come down, while it still remains the highest in the country.

Surprisingly though he says that these numbers could actually represent the worst to come for Albertans preparing for a local economic slowdown due to “the oil slump” and job loss. With less activity around the oil-rush culture in Alberta, citizens locally are preparing to live frugally in the face of economic uncertainty. Albertans will experience continued financial strain “With a higher portion of incomes at risk from cuts in oil patch activity, along with lower corporate spending and scaled-back provincial revenues,” reports Gordon Isfeld in the The Financial Post.

He notes that while crashing oil prices have had a huge impact on the Federal Government’s revenue and in provinces that rely on the oil economy like Alberta, that the long-term and widespread impact is likely to be minimal. While this may be good news for the rest of us, Alberta’s local economy remains relatively vulnerable with uncertain economic fluctuations to come.

I would also argue that the cleanup of Alberta’s main export product, the massive tar sands operations, will have a widespread environmental impact that will be far from minimal, not to mention costly. I wonder if the taxpayers will have to absorb these costs?


Moving forward with financial uncertainty


The consumer debt problem in Alberta isn’t likely to come to a close anytime soon as debt levels persist and the local oil economy continues to take a dive. Bruce Algar, bankruptcy trustee in Calgary, has witnessed many of these so-called oil slumps and says they tend to trigger and signify corporate cuts locally because the province is so dependent on the energy-sector. In the short-term the situation in Alberta could get worse.

An increase in job loss and corporate cuts coupled with skyrocketing debt is certainly going to have a visible impact on monthly debt payments to creditors. With ten percent of the province’s population paying just above their minimum credit card payments each month, the stage is being set for future consumer debt woes in Alberta, says TransUnion’s Director of Research and Industry Jason Wang. Wang predicts that he will continue to see “deteriorating payment patterns,” increasing difficulty making monthly payments and eventually a rise in delinquency payments in Alberta.

The increasing debt and delinquency rates in Alberta are likely to worsen, but how bad is it going to get? Despite that a heavy dependency on the oil industry and recognition that recent declines have led to the debt problem in Alberta today, analysts are looking to the oil fields for a partial solution.

Sal Guatieri, senior economist with BMO says that yes the finances of Albertan’s are being and will be tested under the current circumstances, but if the oil industry makes even a partial rebound, the fallout locally could be cushioned. However in the long run, continued economic reliance on the local energy sector in Alberta is likely to lead to the same types of dependency vulnerabilities that led Alberta here in the first place.

In contrast to the other Provinces who are not as tied locally to the oil-industry, Alberta’s economy will continue to fluctuate with the rise and fall of oil prices if they don’t transition away from tar sand exploitation. Considering the recent global summit on climate change in Paris, the reasons for pivoting away from dirty-energy sectors will reach beyond financial-interests.

Do you think Alberta’s oil industry is the main driver of the Province’s debt problems? Do you think tax payers will end up paying for a lot of the tar sands cleanup? Have a comment to make about your own debt? Leave us a comment below!

This was a Guest Contribution Post to Canadian Budget Binder.

Are You New To Canadian Budget Binder?

Mr. CBB was born and raised in the United Kingdom who then moved to Canada where he is a permanent resident. He recently became a father to a very busy toddler who allows him to be a kid at heart. He bought his first house at the age of 21 after University and his second at the age of 24. Both Mr.CBB and his wife are Debt and Mortgage Free and they did it all in under 5 years using a Budget. Canadian Budget Binder is a place where he shares their financial experiences with his readers and hopes to learn about theirs. Welcome to CBB!


  1. I live in Alberta and can definitely see the piles of debt that everyone seems to be accumulating. It’s like a case of keeping up with the jones’ but sped up because of the higher incomes that the average household has here. The number of people who have new cars very 2-3 years is alarming, and most families have two vehicles plus toys (boat, RV, trailer etc). As much as the economy has slowed down here the malls are still quite busy – boxing day was full of lineups. The housing market depends on the city (Calgary has only decreased slightly, Fort Mac has seen a much bigger drop) but is expected to drop again in 2016

    • The same thing happened here in Ontario Dan and I agree that many of my colleagues are always driving new vehicles or are buying new toys. I don’t know their financial situation but if it’s all on credit, well the numbers keep rolling I guess. Thanks for chiming in! Happy New Year.

  2. Christine Weadick says:

    Alberta and the oil industry has always had a boom and bust cycle going. The boom has been going for a fair while now and it’s looking like the bust is moving in now. Add the fact the our new Prime Minister is not nearly as enthusiastic about the oil industry and it really isn’t looking good for Alberta. People need to look back at history to see what might be coming in the future. Between the Dalton gang and Kathleen Wynne we aren’t doing very well financially in Ontario either.
    I do hope for better things in 2016 but I’m not sure how it will go.
    Have a Happy New Year!!

  3. So debt can be determined where you live in as well just like Alberta. But, I just wonder that this problem can be solved by just being financially responsible and no one wants to have consumer debt right? Happy New Year Mr CBB!

Add Your Comment