Even as provinces loosen state of emergency measures and stores reopen, it’s clear the impact COVID-19 has had on consumer shopping habits – from what we buy to how we pay – will stick with us into the foreseeable future.
At Ratehub, we’ve seen first-hand how these changes have influenced Canadians’ financial choices – down to which credit cards they search for. It’s an increasingly important decision as credit card use is up, with many retailers discouraging cash payments to combat the spread of COVID-19, people shopping online in greater numbers, and debt loads set to rise.
Based on Ratehub proprietary data from tens of thousands of unique users who visited Ratehub.ca in April 2020, low APR credit cards have seen a spike in interest, while travel and retail credit cards have seen significant drops.
Yet, while tighter budgets and a halt on non-essential travel have shifted people’s credit card priorities, some old search patterns still persist.
Let’s dig into the numbers.
- One out of every two Ratehub.ca credit card users (50.4%) viewed rewards cards in April 2020 – a drop from 70.7% of users from the same time last year.
- Low interest credit cards saw the largest growth in views from Ratehub.ca users, with a 36% jump. Low interest cards were also the second most popular type of credit card on the website – overtaking cash back credit cards.
- Secured credit cards, which are deposit-backed cards designed to help rebuild bad credit, saw a 31% year-over-year increase in user views.
- Despite a significant 61% drop in year-over-year user views, travel credit cards continued to be the single most popular credit card type on Ratehub.ca.
Popularity of low interest credit cards reaches new highs
With people tightening their purse strings and more Canadians facing a cash crunch due to the economic effects of COVID-19, the popularity of low interest credit cards saw a marked increase.
Based on Ratehub data, low interest cards experienced a 36% jump in views during April 2020 compared to the same month last year. Low interest cards also represented the second-most viewed credit card type on Ratehub.ca, accounting for 19% of total credit card traffic, even beating out cash back rewards cards.
The spike in views hints to a bigger trend that more Canadians expect to carry larger balances from month-to-month and are focussed on saving on interest – not chasing rewards.
Some of the top low interest credit cards in Canada carry annual rates of 8.99% to 12.99% on balances not paid off in full, which is considerably below the standard of 19.99% found on most credit cards. With lower rates, cardholders who carry a balance can save on interest payments and put more money towards paying down their debt.
Despite a sharp drop in views, travel rewards cards remain sought after
It’s anything but surprising to see that interest in travel credit cards has fallen significantly.
Compared to April 2019, the number of Ratehub users looking for travel credit cards in 2020 dropped over half by a whopping 61 per cent. It’s an expected reaction to the fact COVID-19 has effectively put all non-essential airline travel on hiatus. The drop in travel card searches is also one part of a bigger trend, as the travel industry has been devastated by the effects of COVID-19 with airlines reporting billion-dollar losses and travel spending estimated to fall by upwards of 60% across Canada.
Interestingly however, despite the drop, travel rewards credit cards continued to be the single most popular card type on Ratehub.ca in April 2020, accounting for 30.3% of total user visits.
There are a few reasons why this might be the case. For one, on average, some of the best travel credit cards in Canada dole out more rewards per dollar spent and offer larger sign-up bonuses than their cash back or store credit card alternatives. The draw of accumulating more rewards could be a key reason why travel points cards continued to generate significant eyeballs.
There’s also the fact that travel will inevitably resume, with airlines like Air Canada already releasing a tentative summer flight schedule promoting lower prices on domestic flights. The ability to gradually rack up a large balance of points to save towards a future trip – post-pandemic – clearly still has its appeal. It doesn’t hurt that travel points on virtually every major credit card program don’t have expiration dates and can be held on to for as long as your card is open and in good standing.
Finally, points accumulated on a travel card do offer some flexibility and can help offer significant savings on a variety of travel rewards aside from just flights, like rental cars and hotel stays (which could return to normal sooner than international travel) as well as gift cards (though point values are typically lower when redeemed for merchandise).
Cash isn’t exactly king, as cash back cards saw a modest boost in views
The appeal of cash back credit cards has arguably never been stronger.
Rewards are straightforward dollars and cents and can be used to reduce your balance on your everyday purchases. That said, while cash back credit cards did see a bump in interest from Ratehub.ca users, it was a more modest 6% year-over-year increase. Cash back cards were also the third most popular card type – accounting for 17.9% of total views – behind travel cards (30.3%) and low interest cards (19%).
It’s clear online users looking to compare credit cards didn’t switch from searching for travel cards to cash back cards in droves, as travel cards still hold a strong appeal and many sought low interest alternatives instead.
A focus on rebuilding credit increases as more people look into secured credit cards
Concerns over credit scores are clearly top of mind among many Canadians, as Ratehub.ca saw a 31% year-over-year spike in users viewing secured credit cards in April 2020.
Secured cards act as conventional credit cards but require a cash deposit as collateral and are extremely easy to get, helping those whose credit isn’t in the best shape get approved for a credit card, establish a positive payment history, and gradually rebuild their scores over time. By taking steps to improve credit scores now with a secured card, more Canadians can be in a better position to get approved for an unsecured credit card or take out a new line of credit or loan in the near future.
The spike in secured cards could also suggest a darker outlook, and that fewer people are being approved for unsecured credit cards and turning to secured credit cards as a last resort.
Retail credit cards
With COVID-19 closing several retail locations and disrupting brand loyalty – with more people shopping online and venturing to new stores where shelves are well-stocked – retail credit cards experienced an expected drop in interest.
Ratehub website traffic to store credit cards fell by 24% in April 2020 compared to the same time last year and maintained a minority share of overall Ratehub website traffic, accounting for just 2.2% of online user visits compared to other credit card types.
The retail industry has been among the hardest hit by COVID-19, with an estimated 40% of retailers in Canada shutting doors in March 2020 and sales plunging by as much as 15%.
Balance transfer credit cards
Three out of every twenty people (15.3%) looking to compare credit cards on Ratehub.ca viewed balance transfer credit cards in April 2020 – a modest one per cent increase from the same time last year.
It’s clear balance transfer credit cards continue to be a popular option during COVID-19 for those looking to consolidate and manage debt. However, the fact balance transfer cards require cardholders to make minimum payments and that many credit card issuers are already offering payment deferrals in the wake of COVID-19 likely played some part in their mild increase in popularity.
For those who can meet minimum payments, balance transfer credit cards offer ultra-low promotional interest rates that can help you more efficiently tackle debt racked up on older cards.
Insights are based on cumulative website traffic from tens of thousands on unique users searching for credit cards on Ratehub.ca in April 2020 and April 2019.