Over the years credit cards have become an essential tool in Canadian’s daily lives, providing additional credit, convenience and flexibility. Credit card companies and their products have evolved to the point where they even provide tools to help people manage their finances. As a result, they’re as popular as ever and with the tough economic situation in Canada credit cards can be a very useful tool to help you through the credit squeeze if they’re used properly.

Canadian credit card market overview

The Canadian Bankers Association (CBA) defines a credit card as a “a convenient and flexible payment tool accepted at approximately 661,000 outlets in Canada and 30 million locations worldwide”.

The main features of credit cards include:

• Quick access to unsecured credit – that means there is no collateral or assets that need to be put up against the amounts charged
• Offers an interest-free payment period which is the time from the actual purchase to when the payment is due and you must start paying interest on the payment.

  This also includes the grace_period which is the time from your statement date to the date the payment is due.

• Enables instant payment for goods an services
• 24 hour 7 day a week access to credit, especially valuable for internet purchases
• Fraud protection – and banks are increasing security measures and investing in technology as the 6 big banks spent $5B in technology in 2007
• Offer rewards and benefits including travel incentives, insurance and extended warranties

Canadian credit card facts

The CBA reports that the Canadian credit card market is very competitive as it has:

• Over 550 Canadian credit card issuers offering Visas and MasterCards through 24 main
  providers
• Number of Canadian merchants accepting Visa and Mastercard: 1,203,545 (2008)
• There are approximately 68 low interest credit card products offering interest rates at 14.99% or lower
• 68.2M Canadian Visas/ MasterCards in circulation
• Credit Card Magazine estimated that the credit card market share was approximately as follows, and we’ve estimated the implied market share as follows:

Credit card	Number of cards (Millions)	Estimated market share
Visa & Mastercard	68.2	75%
American Express	15.5	17%
Other	7.3	8%
TOTAL	90.9	100%

Survey of Financial Security 2005 by by Statistics Canada found that Canadians tend to use their credit cards quite wisely as 73% of Canadian households pay their balance off in full every month, and this number has increased annually over the past 5 years:

Fiscal Year ended Oct. 31	Accounts with balances ($M) including those that are paid off off every month	Growth %
2004	23.2	4.5%
2005	24.6	6.0%
2006	26.4	7.3%
2007	27.0	2.1%
2008	27.4	1.4%
* Source: CBA – Visa & Mastercard issuers

Canadians who end up with a balance on their credit card each month pay off 32% – 35% of the balance monthly (and not simply the minimum)

The average sale on Visas and Mastercards has increased annually in each of the past 5 years, however, this growth has broadly been in line with inflation over the same period

Fiscal Year ended Oct. 31	Average Sale	Growth %	Annual inflation growth (CPI)	Difference
2004	$104.00	2.0%	2.1%	-0.1%
2005	$106.00	1.9%	2.1%	-0.2%
2006	$109.00	2.8%	1.7%	1.1%
2007	$111.07	1.9%	2.4%	-0.5%
2008	$112.80	1.6%	1.2%	0.4%
Average	$108.57	2.0%	1.9%	0.1%
*Sources: CBA – Visa & Mastercard issuers * Bank of Canada Total CPI results

• Delinquency rates (ie. the balances that are 90 days + overdue) has not increased significantly over the past 5 years despite the changing economic situation

Fiscal Year ended Oct. 31	Delinquency rates % 90 days & over
2004	0.8%
2005	0.8%
2006	0.8%
2007	0.9%
2008	1.0%
*Sources: CBA – Visa & Mastercard issuers

51% of credit card holders spend $300 or less ($102 average spend)

Canadians have 2.6 credit cards on average which includes bank-issued cards, retail cards and gas cards, compared to 5 in the US

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