Study reveals rising debt and shifting rewards as Canadian credit card usage changes
According to the JD Power 2024 Canada Credit Card Satisfaction Study, the financial health of credit cardholders in Canada is worsening as credit card interest rates and revolving debt rise, creating difficulties for card issuers.
The study revealed more than five out of 10 (57 percent) credit card customers are now categorized as financially unhealthy, up from 52 percent in 2023.
Additionally, 36 percent of customers carry revolving debt, an increase from 34 percent the previous year. As a result, credit card usage is shifting, with average monthly spending declining. Travel and entertainment-related rewards are being replaced by rewards for cashback, groceries, and essentials.
“Canada’s slow-growth economic environment is starting to take its toll on credit card customers, and card usage has started to fundamentally change as a result,” said John Cabell, managing director of payments intelligence at JD Power.
Cabell noted that the percentage of financially healthy customers in Canada has dipped below US levels. Cardholders are spending less and redeeming more rewards focused on essentials.
he emphasized that the economic cycle is widening the gap between financially healthy and unhealthy cardholders, making it important for issuers to respond to the unique needs of these segments.
The overall satisfaction remains flat. Satisfaction is relatively unchanged year over year, influenced by declines in financial health and reduced spending.
On average, credit card customers in Canada now spend $1,342 per month on their cards, down from $1,618 in 2023. Also, 36 percent of cardholders carry revolving debt, and the average self-recalled new purchase interest rate is 17.3 percent.
Rewards are shifting. Only 22 percent of credit card customers are redeeming rewards for travel and entertainment, down from 26 percent in 2023.
Meanwhile, 46 percent are redeeming rewards for cashback and credits, while 29 percent are using rewards for groceries and essentials, both up from the previous year.
Satisfaction is higher among financially healthy customers. For the 43 percent of cardholders categorized as financially healthy, overall satisfaction is 103 points higher on a 1,000-point scale compared to those financially unhealthy.
More healthy customers use co-branded airline cards, which saw a significant improvement in benefits satisfaction this year. Bank-branded cards, more commonly used by financially unhealthy cardholders, experienced slight declines in satisfaction.
Changes to card terms threaten satisfaction. Cardholders who faced changes in terms, including service charges, annual fees, and interest rates, were notably less satisfied in 2024. Financially unhealthy customers are more likely to receive a term change than those who are financially healthy.
Québec cardholders stand out. Cardholders in Québec generally spend less ($109 less per month) but make smarter financial decisions, with 47 percent categorized as financially healthy compared to 43 percent of the national average.
These cardholders also have greater overall satisfaction, scoring 22 points higher than the national average.
Study rankings placed Tangerine Bank as the top-rated issuer, scoring 618. American Express followed closely at 616, and PC Financial ranked third with 588.
In the category of no annual fee credit cards, Canadian Tire Triangle World Elite Mastercard and Tangerine Money-Back Credit Card tied for first with a score of 626. MBNA Amazon.ca Rewards Mastercard ranked third at 606.
For credit cards with an annual fee, American Express Cobalt Card took the top spot with 654, followed by Desjardins Cash Back World Elite Mastercard at 641 and PC Insiders World Elite Mastercard at 627.
The study, conducted from May to July with responses from 11,430 cardholders, measures satisfaction across seven factors: account management, benefits, customer service, new accounts, rewards earning, rewards redeeming, and terms.
