How Plastic Overtook Cash

By | October 5, 2011

The use of credit and debit cards for all manner of purchases has been steadily on the rise in the UK for a number of years, to the point that plastic has now overtaken cash as the preferred method of payment for goods and services. As cash-strapped consumers look for more convenient methods of payment, and incidents of card fraud decrease, more people now appear to feel comfortable using credit cards than carrying money on their persons.

Recent data revealed that Brits also spent more using their debit cards last year than with cash for the first time, with debit card spending reaching a total of 272 billion pounds over the 12 months between October 2009 and October 2010. During the same period, the amount spent in cash totalled a smaller 269 billion.

Use of credit cards has remained fairly stable across the years, in spite of the recession, but is expected to pick up in years to come. By contrast, one method of spending that has fallen significantly is the use of cheques, which are continuing to be phased out by many retailers and companies and may be phased out completely by 2018, according to councils.

The increasing dependence on credit and debit cards could be partly due to the prevalence of card readers at various locations – from petrol stations and supermarkets to restaurants, pubs, clubs and high street stores. Many consumers reportedly feel that their cards will be accepted anywhere, and are thus more prone to rely on their plastic when making any moderate or large purchases, rather than risk carrying large sums of money around. For smaller transactions, such as individual items of food snacks and drinks, cash is still the most popular method of payment.

The period between July and September 2010 saw a particular surge in debit card spending, with a near-eleven per cent rise year on year, accounting for 1.6 million more transactions each day. The August Bank Holiday was cited as a major reason for this increase in spending, which saw cash machine withdrawals falling accordingly.

The next few years are expected to be even bigger for plastic, as more people apply credit card online and the chip technology used in credit cards makes its way into other devices, such as smartphones. This could make it faster and more convenient than ever before to make instant, contactless payments direct from bank and credit accounts.