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Do you flash the cash – or the plastic?

Do you flash the cash – or the plastic?

Category: Banking

Updated: 02/06/2014
First Published: 02/06/2014

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 It is now over 6 months old so the content may be out of date.

The days of needing to have cash to hand at all times have long gone. Now, wallets tend to be dominated by money in the plastic form as consumers are increasingly reliant on card payment, and with retailers making it easier and more convenient than ever there's little need to lug around cash.

This could perhaps explain why the use of credit and debit cards has soared over the last five years while cash payments are languishing, even for smaller purchases, as research from the British Retail Consortium (BRC) has revealed. In 2013 debit card payments made up 50% of all retail sales value, up by 11% in five years, while the use of cash has fallen by 14% over the same period.

There's been a decline in the average value of debit card purchases too – indicating that people are using their cards to pay smaller amounts – while in transaction terms debit cards now account for 32% of the lot, up from 30% the previous year. Cash does however still remain the dominant payment method, accounting for 53% of all transactions, but its hold is definitely starting to slip – the figure has declined by 3% in the last year and by 10% in the last five.

It's a slightly different story for credit cards, however, with the share in transaction volumes falling to 9% from 11% the previous year while the average transaction value was up by 12%, indicating that consumers are spending on larger but fewer items.

Just what's behind this increased use of debit cards? Arguably, it's a combination of factors. Technological advances such as contactless payment and the rise of online shopping could well have had an impact, while using debit instead of credit cards for smaller purchases indicates more considered, measured purchasing with consumers preferring not to spend on credit.

Then there's the fact that a lot of debit cards have started to offer the likes of cashback, reward points and other incentives, which could again encourage their use as consumers are able to get something back from their essential spending – something which cash doesn't quite do.

Helen Dickinson, director general of the BRC, commented on the findings: "Customers are taking advantages of new ways to shop and pay. The availability of contactless cards, handy express stores and self-service tills as well as online sales has increased the use of debit cards for smaller payments in place of cash.

"[Meanwhile] the recent pattern of spending on larger but fewer products on credit cards shows that customers are now feeling more confident than they did a year ago, and reflects the wider consumer outlook of cautious growth."Cash use down 14% in the last five years is a milestone in the development of our digital economy. It shows that customers are embracing digital shopping whether online or on the high street and retailers are adapting and evolving to meet the demand with excellent services. However, it is important to note that cash still remains dominant in the overall number of transactions."

So, do you flash the cash or your flexible friend? In a lot of cases it comes down to personal choice, but if you prefer to use debit cards for the majority of your spending you'll want to make them work harder for you.

That's when finding the right bank account can come in. A lot offer incentive schemes so it's worth doing a bit of research to see what your account can offer, and those that come with the likes of cashback or reward points on purchases could be a great way to get more from your everyday spending.

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