Do you reach for the credit card when you're out shopping, or does cash still burn a hole in your pocket? The rise of contactless payments, where shoppers can pay for low-value transactions by simply waving their cards (or even smartphones) in front of a card reader, had led many to assume that cash would soon be obsolete, but research has shown that both are living in harmony.
Latest figures from the British Bankers' Association have revealed that a whopping 268 million credit card purchases took place in December at a value of £14.2 billion, posting annual increases of 11% and 9% respectively. The figure is even more impressive when looking back over the year – in total, 2.5 billion credit card purchases took place in 2014, up 8% on 2013's figure, at a total value of £145 billion (up 4%). There are some 59 million credit cards currently in issue, showing just how much people have come to rely on their trusty plastic.
Despite the clear increase in credit card spending – which could reflect improved economic conditions, said Richard Woolhouse of the BBA, as people are more willing to spend on credit than in recent years – cash remains the go-to method of payment for many people.
In fact, latest figures from the Payments Council's LINK ATM Scheme show that there are now 69,000 cash machines in the UK, a staggering 58% increase in just over a decade. This shows how much many of us still rely on cash, with various situations calling for the simplicity and convenience of cash payments.
Nonetheless, cash spending has fallen slightly in recent years, arguably as a result of the increased use of credit cards and the rise of contactless spending, but that doesn't necessarily signal the end of cash. In fact, it's estimated that the UK will still collectively spend £251 billion in cash transactions in 2023 – the equivalent of £690 million per day – so there's certainly a lot of life in it yet.
So, which is your payment method of choice? Either way, you'll want to make them work for you, and that means making your money go as far as possible.
Let's start with cash. If you really want to make it go further, you'll want to keep any excess cash in a savings account when not in use, as that way, you'll have more to spend when those big purchases need to be made! Alternatively, what about having a high interest current account as your main bank account? You could earn up to 5% in interest, and as long as you don't go overdrawn, it could be the perfect place to keep your earnings – and could even double up as a savings account.
Arguably, it's also easier to budget with cash, so those trying to get in control of their spending may want to switch to this method for the majority of their transactions. For example, setting yourself a weekly budget and withdrawing the required amount of money will give you visual proof of how much you're spending, making it easier to avoid overdoing it – after all, we all know how easy it can be to put a few unexpected purchases on the debit card, only to wonder why our bank balance is dwindling.
Of course, credit cards can be ideal for many people, often being used as a way to spread the cost of purchases. As long as you stay organised and stick to your repayments there's no reason why this can't work well, particularly if you've got a card that charges 0% interest on purchases or balance transfers. But, what if your card could work even harder?
Cards that come with additional rewards, such as cashback credit cards, are growing in popularity, and can be a great way to get something extra back from your everyday spending. You could even use them as an alternative to cash, and can keep your earnings in a high interest current account or savings account to pay off the card's balance at the end of the month – that way you've got double the benefit, as you're earning interest from your income, and getting cashback from your credit card!
So, no matter what your preferred payment method may be, there are ways to make your choice even more beneficial.
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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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