Kingston, Canada – July 2026 – The John Deutsch Institute (JDI) has released a new JDI Policy Insight paper, Perceptions Versus Realities in the Credit Card Market: Consumer Vulnerability, Competition, and Inequality, written by Chi Danh Dao, a PhD candidate in the Department of Economics at Queen’s University. With Canadian credit card debt above CAD 122 billion, the highest level since 2007, the paper examines how well the evidence supports common claims about that debt.

Dao begins with a measurement problem. Credit bureau data indicate that 48 percent of Canadian cardholders carry a revolving balance, while Bank of Canada surveys put the figure at 26 percent. The two sources capture different populations: surveys tend to reach persistent revolvers who carry debt month after month, while credit reports also include cardholders who usually pay in full but occasionally face an unexpected expense. Quebec’s 2019 reform shows why the distinction matters. Raising the minimum payment from 2 to 5 percent lowered total revolving debt but increased delinquency, since the rule that helped one group tightened constraints on the other.

The profile of revolving cardholders also complicates the standard account. They are often described as financially distressed, yet they report asset holdings and levels of financial comfort comparable to cardholders who pay in full, roughly 3 percent are 30 or more days delinquent, and they are 33 percent more likely to hold a mortgage.

On competition, Dao argues the usual intuition does not hold. Networks compete for consumers, who can switch easily, by offering richer rewards, and recover the cost from merchants, who cannot afford to turn cards away. Canadian interchange fees reach 2.5 percent of a transaction against 10 to 35 cents for a debit tap, and 89 percent of businesses accept credit cards regardless. Federal remedies have had limited effect for the same reason: negotiated fee reductions left rewards intact, and only about 12 percent of retailers planned to use their new surcharging rights.

On inequality, convenience users capture an average of CAD 192 in net rewards annually while revolvers face an average net cost of CAD 672. Dao argues net rewards are an incomplete measure, since they count interest paid without counting the value of the credit it buys. About 2 percent of Canadian consumer spending is financed through revolving debt. Measured through consumer surplus, credit cards still worsen inequality, though by considerably less than the headline figures suggest.

Dao recommends:

1. Match the data source to the policy question. Rules such as minimum-payment requirements affect persistent and occasional revolvers in opposite ways, and the dataset a regulator relies on determines which group is visible.
2. Pair fee reforms with demand-side measures. Since competition can raise merchant fees, fee caps and surcharging rights are unlikely to reduce overutilization without addressing consumer demand.
3. Measure inequality through consumer surplus. Assessments of distributional effects should account for the value of unsecured credit access alongside rewards, interest, and fees.

The last point bears on a live proposal. Following legislative moves in the United States, there is renewed debate about capping Canadian credit card interest rates. A cap would lower borrowing costs, but Dao cautions that banks may respond by reducing credit limits. Higher-income households have other borrowing options; lower-income cardholders may have to cut consumption instead, worsening the inequality the cap was meant to address.

The full paper is available as JDI Policy Insight 26-0702 on the JDI website at jdi.queensu.ca.

About the John Deutsch Institute and the JDI Policy Insight series
The JDI at Queen’s University conducts rigorous, policy-relevant economic research to inform decision-makers in government, industry, and civil society. Through events, publications, and collaborations, the Institute fosters evidence-based dialogue on critical economic challenges facing Canada and the world. The newly launched JDI Policy Insight series provides balanced academic summaries of key policy issues, helping readers assess the benefits, costs, and risks of reforms and understand what we know and don’t know about policy.