Canadian Credit Card Business

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Canadian Credit Card Business


Updated: September 27, 2018

The content is accurate at the time of publication and is subject to change.

It is a little bit curious, that while the credit card crisis in the USA has led to a strained situation on the world's major credit markets, Canada is still keeping its positions strong and relatively safe. There is no hint of tightening requirements for credit card applications to be approved and Canada's credit business seems to be going forward quite well so far.

Reminding you of the situation on the US credit card market, the ever rising delinquency rates and credit losses have got the banks to toughen their lending requirements and change the concept of credit card as easy-to-get free money, the very concept that led to the crash.

What about Canada? What has helped Canada credit card market preserve its position as a strong, reliable and lucrative yet business?

Evidently, there are some signs of strain among the Canadian issuers and credit consumers but they are suppressed by the still strong employment levels and a stable income. Unlike their South neighbours, Canadian customers do not rely on a credit card as the major source of funding and it has helped them to avoid being too much dependent on it.

Another reason for the relative stability on the Canadian credit market is the notably smaller number of credit cards used by an individual customer. The average American carries about twice as many cards in the wallet and it is not difficult to assume that sooner or later he/she will default on any of them, especially as the mortgage and credit crisis provide the perfect premises for that.

An even more important reason for Canada's credit market to stay "aswim" is the way customers manage their accounts. As estimated, two-thirds of the cardholders pay off their balances each month, proving that a credit card for them is more of a convenient payment and finances management tool than a tool for borrowing.

The evidently stronger economy than that in the USA is one of the major engines keeping Canada's credit industry driving. According to Moody's Investors Service Inc, Canada's credit rating agency, the country's lending market still has much room for development and the number of credit cards issued is yet growing.

With all this, you might think that Canadian credit industry is so much consumer-friendly and customers are so much responsible that it all creates a magic harmony and mutual high-profit business. Do not be quick with conclusions.

Canada's issuers have also been hurt with delinquencies and credit losses, or charge-offs. The country has also seen a notable increase in bankruptcies as well. But compared to the situation in the Sates, Canada's numbers are still relatively small and are not likely to increase so far.

What's more, you should not think that Canadian lenders are deprived of their share because most their customers do not pay default rates and late payment fees. Banks are smart enough to make their profits by means of charging retailers big fees for accepting their customers' credit cards.

However, there is one simple but most important thing that determines the favorable situation in Canada - it is cash. Canadians still relying on cash and the relatively strong economy have successfully been keeping the country from the distressing recession on the world's major markets.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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