Credit cards Updated:
There's an ongoing shift towards spending on debit and credit cards as opposed to using cash, even for low-value purchases. The rise of contactless spending has undoubtedly helped drive the trend, as has online shopping, and you only need to ask yourself when you last paid for something substantial using good old notes and coins to realise how much things have changed.
According to research from the UK Cards Association, the value and number of card purchases rose substantially last year: the value of card spending increased by 8.2% to hit a record £600.3 billion, while the number of purchases increased at an even faster rate (12.1%) to 12.96 billion card transactions in 2014. Over 35 million card payments were made every day, and £19,000 was spent per second.
This highlights the ongoing shift from cash to cards, the report noted, as consumers increasingly turn to cards for lower-value transactions, a trend driven by growth in contactless payments of 331% over the year. Total spending on contactless trebled last year to £2.32 billion, with a total of 319 million transactions taking place, a trend largely fuelled by the launch of contactless payments on Transport for London services last September.
In fact, 11% of all contactless transactions in December 2014 were made on London Transport, showing how quickly this has had an impact. Contactless has the potential to become an even bigger payment method, too, as from September 2015, the limit on contactless transactions will increase from £20 to £30.
The figures also revealed that there were just over 159 million payment cards in circulation in 2014, a rise of 1.1% year-on-year, a figure that's comprised of 95.7 million debit cards, 56.9 million credit cards and 6.4 million charge cards. Debit cards are still the most popular payment cards with around 91% of adults holding at least one, but credit cards aren't exactly unpopular, with around 60% having one.
Overall, around 75% of all retail spending was made by card last year – up 10 percentage points since 2009. Again, this was led by debit card payments, which accounted for 77% of all card purchases in the UK, with the average purchase standing at £43.45. This is a drop of £1.04 from 2013, reflecting the impact of an increasing number of lower value contactless payments, a trend replicated in the credit card sector where the average purchase fell by £2.75 to £59.88.
Richard Koch, of The UK Cards Association, commented: "Consumers are making more than twice as many card payments every day than they were 10 years ago, a clear sign of how people are now choosing to use the cards in their wallet rather than cash. With more places now accepting cards, contactless payments and the rise in online shopping, the large jump in card spending we saw last year looks set to continue."
Cards have a bright future, with the number of card payments made in the UK expected to rise by 66% in the next 10 years to hit 19.2 million by 2024, according to the UK Card Payments 2015 report. Debit card payment value is forecast to rise to £718 billion by 2024 – an increase of 76% compared with 2014 – while credit card spending is predicted to increase, too, albeit at a lower level of 29% (to £183 billion) over the next decade.
If you want to make the most of it, get on board! Be on the lookout for cards that charge 0% interest on purchases so you can spread the cost of your buys, and consider using cards that offer cashback and rewards if you can pay your balance off in full every month. This type of deal may be on the decline, but if you look in the right places, you could still get more from your spending.
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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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