Report finds financial health of Canadian credit card holders worsening

Canadian credit card holders’ financial health is falling, with credit card interest rates and revolving debt on the rise, according to a new report.

 

Some 57 per cent of credit card customers are now “financially unhealthy,” up from 52 per cent in 2023, with 36 per cent of customers now carrying revolving credit card debt, up from 34 per cent a year ago, according to a study by J.D. Power.

 

“Essentially, we have seen a decline in financial health and an increase in financial pressures in consumers over the last year, which is a continuation of some trends that we saw in 2023,” said John Cabell, managing director of payments intelligence at J.D. Power. “And that has played out in terms of creating some lower satisfaction in the different areas of consumer experience with their credit card.”

 

The 2024 Canada Credit Card Satisfaction Study also notes that consumers are cashing in rewards points for groceries and essentials instead of travel and entertainment.

“Many consumers might be spending less on discretionary items like travel,” Cabell said, “and really concentrating more on trying to manage their monthly budgets.”

 

While Canadians struggling to pay bills are carrying more credit card debt, the average monthly credit card spend is falling. The average credit card holder in Canada is spending $1,342 a month, down from $1,618 in 2023.

 

“Canada’s slow-growth economic environment is starting to take its toll on credit card customers,” Cabell said, “and card usage has started to fundamentally change as a result.”

 

When it comes to credit card satisfaction, Tangerine Bank ranks first, followed by American Express and PC Financial, the report notes.

 

Popular credit cards include the Canadian Tire Triangle World Elite Mastercard, Tangerine Money-Back Credit Card, and American Express Cobalt Card.

 

Financially healthy consumers tend to be more satisfied with their credit cards than the financially unhealthy ones, Cabell said.

He defines “financially unhealthy” consumers as those who are unable to make monthly payments, or missing them altogether.

 

“Cardholders who are financially unhealthy tend to struggle more with higher interest rates,” Cabell said. “They are incurring service charges, maybe late payments and obviously paying interest. And they may also be struggling with credit limit issues as well.”

 

On the other hand, Cabell said, financially healthy customers tend to pay their statements in full and optimize rewards programs.

 

The trend varies between provinces.

 

Quebecers, for example, tend to be less affluent and spend less, said Cabell, but are more financially healthy on average, with higher credit scores and less credit card debt.

 

“They believe that the (credit) card is healthy thing,” he added. “That’s an interesting — and very positive — usage pattern for that part of the Canadian population.”

 

 

 

This article was first reported by The Star