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Credit Card Trends In Canada

Obtaining a credit card is a significant milestone in the lives of many young Canadians, since it is often the first point of contact with any credit product and increases spending power. There are a plethora of credit cards that are simple to qualify for and may help you improve your credit score if utilized appropriately. As a result, it's no wonder that credit cards are becoming more popular. In fact, it seems that a growing number of Canadians are opting for credit cards. Though cash remains a popular mode of payment, the number of credit cards in use has almost quadrupled from 40 to 76 million between 2000 and 2018.

Reasons Credit Card Usage Is Increasing

While transaction volume for cash and checks has decreased, it has increased significantly for debit, credit, and electronic fund transfers (ETF), as seen in the table below. Canadians are preferring speedier and more convenient payment options such as electronic and contactless payments, according to the 2018 Canadian Payment Methods and Trends study. Credit card use is also being fueled by online bill payments, internet shopping, and app purchases.

As technology advances, more convenient payment options will emerge, and people will naturally gravitate toward them. Based on current patterns, we may expect cash use to continue to decline as more electronic payment alternatives become available.

In addition, loyalty programs have encouraged Canadians to keep using their credit cards.

Payment method - Volume change since 2012
  • Cash and ABM: -19%
  • Cheques and Paper: -28%
  • Debit: 33%
  • Credit Card: 33%
  • ETF: 23%
Numbers are based on 2018 Canadian Payment Methods and Trends report

Evolving Payment Methods

As previously said, credit cards provide a level of convenience that most individuals cannot ignore. Consumer payment preferences will shift as technology improves the many payment choices accessible. The Bank of Canada's 2017 Methods of Payment report implies that we are moving toward a cashless society, as Canadians' preference for contactless debit and credit payments has increased significantly. According to the 2018 Canadian Payment Methods and Trends report, the digitization of payments, which began in 2014, has resulted in a dramatic reduction in the amount of checks, ABM, and cash transactions. We can see a drop in conventional payment methods like cash and a rise in electronic payment methods like debit, credit, and ETF from 2012 to 2017, when digital payments and contactless payments were introduced.
  • 19% decrease in cash and ABM volume
  • 28% decrease in cheque and paper volume
  • Both debit and credit volume increase by 33%
  • ETFs has seen an increase in volume by 23%

Major Canadian banks have responded by migrating more than 40% of their debit cards to contactless as technology shifts consumers' payment preferences away from traditional methods. Given the continuous expansion of contactless payments over the previous four years (2014–2017), this was a required step. According to the 2018 Canadian Payment Methods and Trends report, contactless payment volume on point of sale cards increased from 623 to 2,997 million.

Credit Cards And Debt In Canada

Debt is a challenge that most Canadians encounter on a daily basis. While some debt is beneficial, too much might have a negative impact on your credit score. According to Transunion, credit card debt in Canada averages $4179 dollars, accounting for 5.3 percent of total outstanding debt. When expressed as a percentage of regular monthly payments, however, the figure rises to 14.6 percent, according to the CMHC. “Credit card debt represents a bigger proportion of total planned monthly payments than total outstanding debt,” according to the Canadian Mortgage and Housing Corporation (CMHC).

Credit Card And Credit Limits

Revolving credit products include credit cards. It offers you with a credit line that you may utilize up to the limit. You may recycle the monies you've been given while you pay down your debt. According to the Bank of Canada, 15% of Canadians have credit limits of less than 2000 dollars, while 41% have credit limits of 10,000 dollars or more.

As a result, the majority of Canadians have a credit limit of more than $10,000, making it simple to overspend and accumulate debt. The issue with rising credit card debt is that it is the sort of debt that Canadians fail on first in times of financial duress, according to Transunion's debt hierarchy. On the plus side, according to the Canadian Bankers Association, most Canadians don't use their credit cards to borrow money; rather, they use them to pay for things. That is, they use credit cards as a means to a goal rather than as a source of financing.

Credit Card Rewards

While credit cards are a quick and handy way of payment, credit card rewards programs are one of the main reasons Canadians use them for both large and little transactions. The Canadian Bankers Association reports that 72 percent of Canadians have at least one credit card with a rewards program. The majority of Canadians use their cards to accumulate points in order to pay for a family trip with travel points, save money on groceries with cash-back incentives, or give to charity with reward points.

According to Finder.com, 84 percent of Canadians chose their credit card based on the benefits they would get, with annual fees (37 percent) and interest rates (8 percent) following closely behind.

What Are Canadians Buying With Their Credit Cards?

According to the Bank of Canada, 89 percent of Canadians have at least one credit card, but what do they use it for?

According to finder.com, the following are the primary retail categories where Canadians use their credit cards: Groceries/Drugs, Gasoline, Health Care, Durable Goods, Personal Attire.

Bottom Line

Credit card commercials are quite common in Canada, making it simple to get many credit cards with minimal effort. However, it's vital to remember that as credit card use rises, so does the risk of debt accumulation. Credit card purchases, unlike cash, are difficult to trace, making it simple to spend more than you should or can afford. It's also crucial to educate yourself on the many options and choose the credit card that best meets your requirements.