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Growth in card spending hits 3-year high

Growth in card spending hits 3-year high

Category: Banking

Updated: 16/06/2014
First Published: 16/06/2014

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This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

These days more and more of us are turning to cards rather than cash when we get to the tills, and figures from The UK Cards Association have revealed just how quickly this is happening – on an annual basis, spending on debit and credit cards has grown by 7.5% to reach a whopping £46.7bn, with this annual growth rate posting a record three-year high.

It's a huge amount of money, and it seems that many of us are choosing to whip out the plastic for purchases that would have traditionally been made in cash. Take smaller purchases, for example. Transactions of a few pounds used to be made in cash, but with the likes of contactless payment it's now quicker and more convenient to pay by card instead.

Then there's the fact that a lot of people simply don't withdraw much cash anymore, often relying entirely on their card to make any purchases, and with most retailers offering card payment there's no reason not to.

The figures back this up. Cardholders are spending less per transaction but are using their cards more frequently – the average transaction value has fallen to £47.88 from £49.02 a year ago – indicating a clear shift in consumer spending habits.

Richard Koch, of The UK Cards Association, commented on the findings:

"It is interesting to see that as the average amount people spend in each transaction goes down, there is an increasing preference for cards over cash. A major driver of this trend is the increased use of contactless cards – for example, people buying their lunch or a small bag of groceries – and feedback from cardholders shows they value the speed and convenience of this method of payment.

"This displacement of cash is only likely to continue as contactless cards are rolled out on public transport networks such as Transport for London, and more widely across the UK in the coming years."

So, just what are we spending all that money on? Well, entertainment is a strong contributor, with card spending in this sector increasing by £25 million over the year to £3.7 billion in April. Card spending on petrol is at a record high, amounting to 91% of all spending in this sector – when did you last pay for fuel in cash? – but there was also a significant rise in financial sector spending, posting an increase of £52 million to reach £5.2 billion, driven by the likes of ISA contributions.

Happily, it would also seem that people are becoming less reliant on credit to make everyday purchases. Debit card spending grew by 8.4% over the year (reaching £33bn) while credit card spending grew by a much more modest 5.4% (totalling £13.8bn), with the ever-widening gap between the two indicating that people don't want to pay for things with borrowed money.

Are you adding to this trend of card spending? Chances are, yes, and with additional incentives – as well as the convenience – it could well be a good decision. A lot of bank accounts will offer the likes of cashback or reward points on debit card purchases, and with competition in the sector continuing to heat up it could mean that even more of us will choose to pay for things in this way. So, check out our pick of the best bank accounts and see if you'll be adding to the trend.

What Next?

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

 
 
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