It’s a question that every Canadian consumer has heard often at the checkout: “How are you going to pay today?” However, amid a souring economy and rising inflation, it looks like fewer Canadians are answering with “credit.”
According to J.D. Power’s study of credit card satisfaction, which surveyed of 6,478 Canadian credit cardholders, Canadians are charging a touch less to their primary credit cards than they used to (the study found that the average credit card customer spent $1,144 per month on their primary card this year, which is $11 less than a year ago).
However, this doesn’t necessarily mean that Canadians are spending less overall — the study (which was conducted between May and June 2022) also found that cash, debit card and other non-credit card spending is up 51 per cent this year.
Additionally, more than 36 per cent of credit card customers surveyed said that they would consider alternative financing options (such as personal loans, “buy now pay later” plans or flexible financing/installment loans) if making a big-ticket purchase. According to the study, factors like reasonable fees and competitive interest rates are key drivers in these shifting consumer preferences.
Does this mean that Canadians are moving away from credit cards? Not necessarily, as the study also reported that consumer satisfaction with credit cards remains high — but it appears that customers are looking for their best options amid hard financial times.
“Overall credit card customer satisfaction in Canada has been remarkably steady for the past several years, and we’re even seeing some increases in satisfaction with product and benefit-level satisfaction, but macroeconomic trends and growing competition from alternative lending providers should raise concern for card issuers,” John Cabell, managing director of payments intelligence at J.D. Power, said in a news release.
“Steps taken now to tighten up problem resolution, better align rewards and benefits with customer needs and improve customer engagement will be critical for customer retention and growth as we enter a potentially difficult economic cycle.”
Canadian consumers looking for more options for payments makes at the moment, as the study also highlighted that more Canadians are struggling with their financial health right now. Specifically, J.D. Power noted that 54 per cent of credit card consumers are now classified as “financially unhealthy,” which is a 9 percentage point increase from last year.
J.D. Power also reported that 24 per cent of credit card customers in Canada say that they are doing worse financially in 2022 than they did in the previous year (up from 16 per cent in 2021), and 31 per cent of credit card customers are carrying revolving debt on their primary cards (up 5 per cent from 24 per cent in 2021).
With this financial stress in mind, it makes sense that the way that we spend our money may be shifting — now, and as we move forward.