Close-up of a man entering his credit card number on his smart phone

Between March 2015 and March 2016, 80 per cent of Canadians shopped online—and that number continues to grow, finds a study by Canada Post.

World | Economy

Two credit cards for every Canadian—we are on our way to becoming one of the most cashless societies in the world

Like Sweden, Canada leads the pack when it comes to paying without cash

A Facebook IconFacebook A Twitter IconTwitter A Linkedin IconLinkedin An Email IconEmail

In Sweden, cash isn’t king. Two-thirds of Swedes say they don’t use cash at all—even using debit or credit cards for small purchases. According to Sweden’s Central Bank, the country will likely soon stop accepting cash altogether, and is investigating whether Sweden should become the world’s first economy to introduce a cryptocurrency, the e-krona.

Could Canada be next? A 2017 survey conducted by Forex Bonuses ranks it as one of the most cashless societies worldwide, with two credit cards for every Canadian.

“With each passing year, Canada is becoming cashless,” says Sean Cooper, author of Burn Your Mortgage and a personal finance expert. “Businesses have pushed people in that direction.” He says the practice of heavily promoting credit cards to college and university students means Canadians get acquainted with credit early—and tech-savvy millennials have been big adopters.

Many Canadians like the convenience of not carrying cash, says Cooper, and they “love their reward points.” There’s the added boon of extended warranties, as well as travel and auto insurance on certain credit cards. “They’ve made it so easy to spend,” he says.

Banks and retailers have also simplified the payment process. More than 95 per cent of credit cards in Canada supported contactless payments in 2016. The big banks have also migrated more than 40 per cent of their debit cards to contactless, according to Technology Strategies International Inc.

As of 2016, 40 per cent of retailers’ point-of-sale devices have been contactless-payment enabled.

And because more Canadians are shopping online, that’s necessitating the use of credit, Interac or online accounts such as Paypal to complete transactions. Between March 2015 and March 2016, 80 per cent of Canadians shopped online—and that number continues to grow, finds a study by Canada Post. 

Paul Parisi, president of Paypal Canada, agrees. “The shift to cashless payments is driven by convenience and access to technology, namely the Internet and mobile phones,” he says. “Canadian consumers want to have ease and speed built into the way they pay.”

The dark side of going cashless

Mitchell Huynh, a personal finance professor at the University of Toronto’s Mississauga campus, says the downside of putting all purchases on credit cards is that Canadians owe $1.71 for every dollar of disposable income (as of Q3 in 2017). “As a society we are less patient—we buy what we want when we want it,” he says. “Instagram encourages everyone to chase that next fad.”

And “credit cards dull the pain of spending,” says Cooper. He says studies have shown that when people pay on credit, they spend 12-18 per cent more than if they had paid with cash. He says Canadians don’t pay their credit card balances in full, racking up large interest charges and damaging their credit rating. 

Plus, there’s the issue of identity theft and credit card fraud, which doesn’t exist with cash payments. There were 6,393 identity fraud victims in Canada in 2016, according to CPA Canada’s Fraud Survey.

Is Canada on track to go completely cashless? Huynh thinks so. “It’s moving forward at a fast pace. Soon you’ll be able to pay with your face.”