Credit cards Updated:
When was the last time you paid for something by card? Chances are it was pretty recently, and of course, you're not alone. Paying on credit and debit cards is increasingly becoming the norm, so much so that consumers baulk at the idea of a retailer not having card payment facilities, and the second report this week has revealed the growing extent of card payments in the UK.
And it's growing fast. According to the latest figures from the UK Cards Association, annual domestic card spending topped a whopping £0.5 trillion for the first time last year, with 74.5% of all retail spending now made using debit or credit cards. All in all, total card spending reached £520 billion over the year – not only an increase of 6.7% on 2012's total, but that figure has more than doubled since 2003 when it stood at £244 billion.
"These figures reveal a huge shift over the last decade in the way we choose to transact," said Melanie Johnson, chair of The UK Cards Association. "Rather than carrying cash consumers are increasingly opting for their cards instead, not least because of the extra protections available."
In total there are 175.6 million cards in issue in the UK, so it's no wonder that the usage figure is so high. And, when including spending by non-domestic visitors to the UK, that tally rises even further with the total value of card purchases reaching £534 billion – meaning card spending now constitutes over a third (33%) of the UK's total GDP, which was an estimated £1,612 billion in 2013.
It's an impressive sum, and means cards are now used for three in every four pounds spent in shops – up from two in four a decade ago – as consumers are shunning cash in favour of their flexible friends. But why is that? Well, the reasons are endless – it could be down to the likes of contactless payments offering increased flexibility, and of course online shopping could have had a lot to do with it. Then there's the convenience, the protection, the cashback and reward incentives… the list goes on.
However, this doesn't mean that people are getting too comfortable. Despite the rise in card spending the figures also revealed a clear desire for consumers to pay down debt, with there being a significant fall in the value of outstanding borrowing over the last few years – the overall amount outstanding in 2013 averaged £56.4 billion per month, a 15.6% drop from the 2005 peak of £67.4 billion.
So just what does the future hold for the card industry? Well, it's looking bright, with the trend of increasing card payments expected to continue.
Both the volume and value of card transactions are forecast to increase substantially over the next 10 years, rising to 17.7 billion transactions (up from 10.7 billion in 2013) at a total value of £874 billion in 2023, a significant jump from the £520 billion recorded last year, with the Association expecting much of this rise to come from an increased use of debit cards.
Other factors will likely add to the figures too, such as an increased willingness to make smaller payments through the likes of contactless technology, while internet shopping will continue to surge in line with an ever-increasing take up of smartphones and tablets.
It's hoped that further technological advancements, such as mobile point of sale devices, will mean even the smallest enterprises will be able to accept card payments, no doubt boosting the use of cards even further.
Really, it's no surprise to see such surging use of credit and debit cards, particularly when you consider the benefits. Not only are they a lot more secure than cash – if you lose your wallet you can easily replace the cards in it, something which can't be achieved with cash – but you'll get extra consumer protection too.
Then there are the various incentives you can find. Banks and building societies are increasingly offering the likes of reward points or cashback simply for making everyday purchases, and while such incentives used to be reserved for credit cards a lot of debit cards now offer similar schemes.
Credit cards can be beneficial when used wisely as well, again from the likes of cashback but also from 0% purchase and balance transfer deals which could help you spread the cost of certain items, and as long as you manage these cards carefully there's nothing to stop you from benefitting.
It's all about finding the card that works for you and your lifestyle, whether that's a credit card, debit card or even an ATM-only or charge card. So, will you be adding to the tally of card spending?
Research the whole credit card market to bring you the best 0% spending and 0% balance transfer cards
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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