Cash no longer king as debit cards take over - Money - News - Moneyfacts

News

Cash no longer king as debit cards take over

Cash no longer king as debit cards take over

Category: Money

Updated: 03/12/2010
First Published: 03/12/2010

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 It is now over 6 months old so the content may be out of date.

Once the unrivaled payment method of choice for Britons, cash was overtaken by debit cards this summer.

It is the first time ever that spending on debit cards has been of greater value than cash, and the breakthrough came over the August Bank Holiday when the running total of debit card spending (£276 billion) overtook cash (£269 billion).

The use of debit cards has rocketed in recent times, as the number of purchases rose by a tenth in the summer compared to last year, with an additional 1.6 million transactions on debit cards every day between July and September.

As a further indication of the move away from cash, withdrawals from cash machines fell 1.5% in the third quarter, compared with the same period in 2009, a decline in real terms of almost 5%.

"Cash is too cumbersome for many consumers these days - they prefer a card for anything more than the smallest transactions," Sandra Quinn, director of communications, Payments Council, explained.

"We now expect our debit cards to be accepted everywhere we go - in pubs and clubs, at the corner shop, online and on the high street. Having quickly supplanted cheques, then claimed the scalp of credit cards, they have now usurped cash's throne too."

Credit card spending has barely changed in cash terms in recent years - over the last year it is up by only 5% compared to 2005, a decline in real terms of a tenth.

Since 2005 the number of cards in issue has also fallen from 70.6 million to 60.7 million (-14%), and the number of cardholders has decreased from 31.7 million to 30 million.

Credit cards fall well behind their debit cards cousins – debit cards were used three times more frequently than credit cards in the third quarter of 2010.

"Once credit cards were the only convenient way to pay as alternatives to physical cash and cheques, but now people have far more options," Quinn added.

"Conscious of the need to repay credit borrowed, consumers are increasingly choosing their debit card over credit card. Contrary to expectation, the possibility of greater financial stress during the recession and beyond has not driven people to rely more heavily on their credit cards."

Cheques accelerated their flight into the payments wilderness, as 104 million fewer were written over the last twelve months compared to the previous year.

At this pace of decline, both the number of cheques written and the value of money they move will almost halve by 2015.

Faster Payments – transferring cash between accounts online – rose 53% in value terms and 42% in volume terms, as more banks joined the system and in September the maximum value threshold for internet and phone payments rose from £10,000 to £100,000.

"Consumers expect their banks to offer the service now - whereas a tenner borrowed from a friend was once repaid in cash, now it's quite common for a Faster Payment to do the job direct," said Quinn.

Find the best bank account for you - compare bank accounts

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.

Related Articles

Would you spend more for a character property?

We all have our own ideas of what makes a dream home, and for many, character features are at the top of the list. But how much more would you be willing to pay for those kinds of additions – and could they even help you save money in the future?

A quarter of Brits have fallen victim to a scam

Think you know how to spot a scam? It may not be as easy as you’d think, with 25% of Brits admitting that they’ve been the victim of one in the past, and a further 73% are concerned about being scammed in the future.

Brits’ bad spending habits revealed

Many of us like to think that we’re good with money, yet there are often things that get in the way of regular saving and financial security. Solution Loans has taken a look, and has identified the bad spending habits that leave us in the red.
 
Close