Nearly 60 percent of Canadian credit cardholders are now deemed financially unhealthy, according to a recent report, highlighting a trend of rising interest rates and revolving debt that is affecting consumers’ credit card usage habits.
John Cabell, managing director of payments intelligence at J.D. Power, attributes this decline in financial health to Canada’s slow-growing economy, saying, “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.”
On average, Canadian credit card users are now spending $1,342 per month, down from $1,618 in 2023, while overall satisfaction has remained relatively flat year-over-year, moderated by financial health decline and reduced spending.
Meanwhile, cardholders categorized as financially healthy are significantly more satisfied, reporting 103 points higher satisfaction on a 1,000-point scale compared to their financially unhealthy counterparts, according to the report.
Changing Habits
Amid a decline in financial health, J.D. Power reported a noticeable shift in how credit card rewards are used. The number of customers redeeming rewards for travel and entertainment has dropped to 22 percent from 26 percent last year. In contrast, 46 percent of cardholders are now redeeming rewards for cashback and 29 percent for groceries and essentials, reflecting a broader trend towards prioritizing practical rewards over leisure ones.
“With the percentage of financially healthy customers now dipping below levels we’re seeing in the United States, cardholders are spending less and have become more likely to redeem rewards focused on essentials,“ Cabell said. ”The economic cycle is widening the gap between financially healthy and unhealthy cardholders, so it’s important for issuers to respond to the unique needs of these broadly differing segments.”
Another key finding is that changes to credit card terms, such as adjustments in service charges, annual fees, and interest rates, have led to greater dissatisfaction among users. However, the report noted that financially unhealthy customers are more likely to receive a change to their card terms from their card issuer than financially healthy customers.
The study also reveals regional differences, with Quebec cardholders displaying a more cautious approach to credit card usage. Compared to other regions, less affluent Quebec residents spend $109 less per month on their cards and show higher financial health and satisfaction with their credit card usage.
The study ranks Tangerine Bank highest in customer satisfaction among credit card issuers, followed by American Express and PC Financial. For cards with no annual fee, the Canadian Tire Triangle World Elite Mastercard and the Tangerine Money-Back Credit Card tie for the top spot. Among cards with an annual fee, the American Express Cobalt Card leads in satisfaction.
J.D. Power’s study is based on a survey of 11,430 cardholders who used a major credit card in the past three months. The survey was conducted between May and July 2024.
