Canadians Lean Towards Credit Card Alternatives

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A recent study shows Canadians seem to be turning to credit card alternatives. More than one-third (36%) of credit card customers say they would seek different financing options for their larger purchases. The alternate options appear aimed toward BNPL services and even personal loans.

Canadians Considering Credit Card Alternatives

According to the J.D. Power 2022 Canada Credit Card Satisfaction Study, a third of credit card holders say they are considering alternative payment options in place of credit cards. The 20% that plan on switching cards say they would consider alternative payment options if offered a lowered interest rate on their purchases. The key findings in the 2022 study point to a decline in spending on primary credit cards. However, the use of cash, debit cards, and other non-credit card-related spending is up by 51% among Canadians. BNPL and personal loans appear to be the go-to alternatives for Canadians seeking other payment methods in place of credit cards.

What is BNPL?

If you’re unfamiliar with BNPL (Buy Now, Pay Later) services, you may have seen the option to use such a service during online checkout. Some popular BNPL services include fintech like Klarna and Afterpay, and if you’re Canadian, then you’re probably familiar with PayBright by affirm. BNPL services work in installment loans. The option is usually offered at checkout online and sometimes in stores. Typically, BNPL users make a small down payment for the overall purchase, then pay off the remaining balance in a series of installment loans (often interest-free).

Related Article: BNPL Loans May Soon Count Towards Credit Scores

Key Findings For 2022 Study

“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,” says John Cabell, managing director of payments intelligence at J.D. Power. “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.”

Furthermore, the J.D. Power 2022 study also finds the financial health of Canadian consumers is suffering. Over half (54%) of Canadian credit card consumers are classified as financially unhealthy. That is nine percentage points above the previous year.

The way J.D. Power measures the financial health of consumers is by combining their spending/savings ratio, credit worthiness, and safety net items, such as insurance coverage which creates a scale that ranges from healthy to vulnerable. In comparison, the trend observed in the United States for financially unhealthy credit card customers has only risen four percentage points this year.

Additionally, the study found it is time for credit card customers to reevaluate credit card choices. A total of 27% of credit card holders feel they don’t fully understand their current credit card benefits and features. Cash back cardholders are also less satisfied with their current credit card rewards, according to this 2022 study. Moreover, on a 1,000-point scale, Canadian cardholders rank their satisfaction with credit cards at 764, despite product improvements. An expected outcome for this key finding considering the scores fall in line with scores from the past five years. Find the press release for this 2022 study here.

About The Canada Credit Card Satisfaction Study

The Canada Credit Card Satisfaction Study is a comprehensive, independent survey of credit cardholders. It was created to assist customers and card issuers act on satisfaction ratings from large brands on the market. Learn more about the study here.

About J.D. Power

J.D. Power is a global leader in consumer insights, advisory services and data and analytics. A pioneer in the use of big data, artificial intelligence (AI) and algorithmic modeling capabilities to understand consumer behavior, J.D. Power has been delivering incisive industry intelligence on customer interactions with brands and products for more than 50 years. The world’s leading businesses across major industries rely on J.D. Power to guide their customer-facing strategies.

Related Article: Klarna Card Launches in the U.S.

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About: Jeannyn Gomez
Jeannyn Gomez

Jeannyn is the Content Management Assistant for In addition to serving on all aspects of social media and spreading the word on expert credit and personal finance advice, Jeannyn finds herself on quests for humor, supernatural phenomena, and conspiracy theories for fun.

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