Of the three Cs of payment methods – cash, card or check – the big winner during the pandemic was the card.
Data from Statistics Canada, the Canadian Bankers Association and even the Bank of Canada shows that credit cards are the preferred payment method, although it seems that ten years ago consumers were reluctant to use them too frequently.
Other recent studies have looked at how integrated credit cards became during the pandemic, as people shied away from using potentially germ-laden money for in-person purchases while being more inclined to shop online.
Oddly enough, however, a study among them from JD Power, examining satisfaction with credit cards, found that Canadians were engaging in somewhat counterintuitive behavior when it came to credit cards.
“Clearly, there has been a lot of financial turmoil for Canadian consumers during this time, and spending has gone down, as has card usage,” said John Cabell, director of banking and information. on payments at JD Power.
“What’s really interesting in turn is that satisfaction has actually improved with credit cards.”
In addition, nearly a third of credit card users in this year’s survey feel very confident about their financial situation, up 20% from 2020, and about the economy, up 11%.
Part of the reason may be that Canadians are more selective when spending with cards. The JD Power report found that monthly expenses fell from $ 1,200 last year to $ 1,155. (Spending is also down for all payment types, the report notes).
Still, some consumers are less satisfied with credit, says Cabell.
Typically, these people have monthly balances and are struggling to pay their monthly bills.
“In some cases, these consumers tend to be in what we call ‘the wrong card’; they will have a high interest rate credit card and be in debt, which it would probably be better for them to have. a lower interest rate card. ”
He further adds that not all consumers may be able to switch cards.
Among the most satisfied are those who use no-charge refund cards.
As you might expect, the biggest drop in satisfaction has been with the travel rewards cards that have an annual fee.
“The use of rewards and perks is important to consumer satisfaction, and if people weren’t able to use them, then they might have evaluated their choice,” Cabell explains.
Make no mistake, loyalty rewards remain the main driver of credit card popularity, especially cash back rewards, says Mikael Castaldo, general manager of day-to-day banking at Ratehub.ca, who ran his own. separate survey.
He revealed that cash back card usage increased by 70%, while travel rewards declined by about the same amount.
In-store credit cards, like President’s Choice Financial cards, also rank highly, says Castaldo.
Yet the Ratehub.ca poll also found that Canadians aren’t as card savvy as they think they are.
While 80 percent said they were well informed, “most Canadians don’t know that having a balance on their credit card hurts their credit score,” he says. “The other thing a lot of people didn’t know is that keeping your oldest credit card helps a lot in building your credit score.”
In turn, canceling an old card can negatively impact your credit rating, resulting in less favorable terms for loans, says John Shmuel, editor of Rates.ca.
“If you buy a car, for example, you could be turned down for a great zero-interest loan and have to go somewhere else for business that charges 7.99% interest,” he says.
“A bad credit score can even affect qualifying for another credit card if you need another one.”
And nowadays, it is more difficult to do without.
The use of credit has accelerated at a faster rate than any other form of payment for nearly a decade, says Shmuel.
Today, Canadians hold more than 76 million credit cards and more than 70 percent of balances pay off in full, according to statistics from the Canadian Bankers Association.
While the 2020 Payments Canada Payments Report – examining data from 2014 to 2019 – found that credit usage and spending has grown steadily every year and now exceeds debit usage. Liquidity, on the other hand, fell sharply during this period.
This is not necessarily good news.
Numerous studies show that credit cards increase our propensity to overspend. This includes a 2016 Reserve Bank of Boston report that found that the use of non-monetary items increased occasional spend per transaction by more than 400%.
In addition, Statistics Canada data shows that the credit card debt of Canadians has increased by about 20% per year over the past 20 years. That was until the pandemic struck when the total sum of outstanding balances rose from nearly $ 91 billion in February of last year to $ 74 billion in January.
Perhaps Canadians are more and more savvy when it comes to using credit cards.
Here again, the pandemic has been an economic drag on their use, adds Cabell.
“You would think consumers really would have used their cards more, but the compensation was job losses, economic uncertainty and the lack of opportunities to spend on travel and entertainment.”