Canadians ‘tap’ debt more often as cash payments fall sharply
Easy credit – and even easier ways to tap it – are changing the way Canadian consumers pay for things.
A new report released by the Bank of Canada shows the continued decline in the use of physical money versus plastic, with the number of cash-based transactions falling to less than half.
Instead, shoppers are increasingly reaching for their cards, a trend that’s quickened with the recent introduction of technology that allows customers to tap their credit card on a terminal to make purchases.
“Increased use of credit cards, particularly contactless credit cards, was a key factor in this development,” the study said.
The research was included as part of the spring edition of the Bank of Canada Review on Thursday.
The bank’s research shows consumers are favouring the use of credit over debit transactions from their bank accounts, as well – a trend consistent with a historic rise in household debt levels.
According to a 2013 method-of-payment survey, credit card use increased to nearly 31 per cent compared with just over 19 per cent in 2009. Debit card usage slipped to 21 per cent from nearly 25 per cent.
Cash accounted for about 44 per cent of the transactions, down a sharp 10 percentage points from a 2009 review.
“The market share of cash in terms of the number of retail transactions continues to decrease,” the bank paper said. “The credit card share of purchases has continued to rise, at the expense of both cash and debit cards.”
WATCH: Dr. Paul Kershaw, founder of Generation Squeeze, talks about which Canadians carry the most debt.