Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified.
Distributional Effects of Payment Card Pricing and Merchant Cost Pass-through in Canada and the United StatesAlthough credit cards are more expensive for merchants to accept than cash or debit cards, merchants typically pass through their costs evenly to all customers. Along with consumer card rewards and banking fees, this creates cross-subsidies between payment methods. Because higher-income individuals tend to use credit cards more than those with lower incomes, our results indicate that these cross-subsidies might lead to regressive distributional effects.