Canadians love their credit cards. Today 9-in-10 adults have at least one credit or charge card. And they are using them more and more to make payments, a trend that has grown over time. Credit now accounts for nearly half of cardholders’ total personal spend, up from less than a third 10 years ago when credit placed behind cash and debit. Credit is now the preferred payment method, outpacing debit, cash and checks.
What’s causing Canadians to whip out their credit card more often? A major driving force behind the increasing use of credit is reward programs. More Canadians are using credit cards for a wider range of purchases in order to accumulate rewards and reap the benefits that the reward programs offer. It’s a major change in how Canadians use their credit card, shifting from what started as a means of accessing credit to the more recent trend of actually getting something back in return.
But when it comes to credit card reward programs, it seems that cash is still king. Or at least cashback. This is by far the most appealing credit card reward program. Which isn’t really surprising: cashback rewards represent the simplest, most intuitive conceptualization of a payment method that pays you back. More cardholders find cashback rewards to be very or somewhat appealing (83%) than any other type of credit card rewards program. Well ahead of travel rewards and retail/store rewards, which are each favored by around 6-in-10 adults.
Credit card cashback rewards come in many different forms. Customers can opt to have digital cash deposited to their checking or savings account or TFSA; to an investment account if they have one; or as a credit to help pay down their credit card bill. Increasingly popular is a form of cashback linked to a specific retailer, where customers accumulate digital cash when making purchases, which can then be redeemed as a reduction in their bill at the cash register when shopping at that retailer. Walmart and Loblaws through its PC Points program are two such retailer quasi cashback programs. Participation in retailer reward programs is high, with around 6-in-10 cardholders participating in Shoppers Drug Mart’s Optimum program (59%) and Canadian Tire’s ‘Money’ rewards program (60%). PC Points participation is not far behind (54%). Other popular retailer related rewards favored by cardholders include HBC rewards (35%), iRewards from Indigo (28%), and Costco membership (26%).
Despite the appeal of cashback, travel rewards are still a major draw for both credit card owners and non-owners. Three in four cardholders (76%) say they are Air Miles members, while just under four in ten collect Aeroplan (37%) points, both largely unchanged over the last few years. It will be interesting to see if participation in Air Miles is impacted by the negative publicity which the program received in 2016 over its plans to force members’ miles to expire. The plan only being withdrawn after legislation to overturn it was tabled in Ontario.
Ipsos also asked Canadians which type of reward they would choose if they could have only one such program on a credit card. Over half of both cardholders (55%) and non-cardholders (53%) opted for cashback rewards, while 1-in-5 cardholders favored travel rewards.
It’s likely that travel will continue to be a popular reward choice. But the appeal of a cash return as a benefit of using a credit or charge card is expected to continue to help fuel the growth of credit as a payment method. It would not be a surprise to see credit capture more than half of cardholders’ personal spend in the next few years. Which brings the cashless society that experts have expected for so long that much closer to becoming a reality.