Consumers turning to debit over credit cards
By UK CreditCards.com
Debit card usage is on the rise in the UK, as consumers move away from carrying large amounts of cash and attempt to curb their spending on credit cards. New figures from the Payments Council reveal that debit cards are now the most common method of payment, while cash withdrawals have fallen and credit card spending has declined in real terms.
cards take top spot
Britons are making an extra 1.6m purchases every day on their debit cards compared to last year, according to the latest report from the Payments Council. During August, the running total of debit card spending (£272bn) overtook the cumulative amount of cash spent (£269bn). The number of debit card purchases was 10% higher this summer than last, and retailers recorded an additional 1.6m transactions on debit cards every day between July and September, with the amount spent rising by almost 11%.
Sandra Quinn, director of communications at the Payments Council, said that many consumers find cash too "cumbersome" and prefer the convenience of plastic. She pointed out that debit cards can now be accepted in most places, including pubs, clubs, corner shops, high-street stores and online retailers, and that they have now "usurped cash's throne."
cards in decline
As well as overtaking cash, debit cards have increased their dominance over credit cards. They were used three times more frequently than credit cards during the third quarter of 2010, while the total outstanding balance on credit cards dropped to its lowest level since 2003.
The figures show that, since 2005, credit card spending has declined by one-tenth in real terms. Over the same period, the number of cards in circulation has fallen from 70.6m to 60.7m, while the number of cardholders has dropped from 31.7 million to 30 million.
Ms Quinn said that consumers now have more options available to them when paying for goods and services. She observed: "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."
This level of prudence may well continue throughout the festive period, according to financial services provider Legal & General. The company's recent MoneyMood survey found that the majority of households plan to limit the amount they spend this Christmas, with just one in six expecting to spend more this year than last. Mark Gregory, executive director of savings, said that households are taking a "sensible approach to spending" and that this attitude may mean that "fewer households will be paying off credit card debt in the aftermath of Christmas this time round".
Published: 17 December 2010
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