the business ladder

For the first time ever, the number of debit card transactions has overtaken cash payments over the summer trading period. Use of debit cards has also soared as an extra 1.6 million purchases are made each day compared to last year.

Debit cards finally established dominance during the August Bank Holiday, when the total of spending on debit cards (£272 billion) finally overtook the cumulative amount of cash spent (£269 billion) in the economy.

Use of debit cards is accelerating rapidly and the number of purchases rose 10% this summer compared to the previous year, with an additional 1.6 million transactions on debit cards each day in the period between July and September.  The amount spent also rose almost 11% with debit cards used three times more frequently than credit cards in the third quarter of 2010.

As a further indication of the move towards ‘cashlessness’, withdrawals from cash machines dropped 1.5% in the third quarter, compared with the same period in 2009 which is a decline in real terms of almost 5%.

Director of Communications at The Payments Council, Sandra Quinn, explained the trend: “Cash is too cumbersome for many consumers these days – they prefer a card for anything more than the smallest transactions.  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 remained fairly flat in the third quarter of 2010, when compared with the same period in 2009. Summer credit card spending was up just 2.2%, well below CPI while the total balance outstanding on our credit cards fell to its lowest level since 2003 – showing that customers are taking repayments seriously.

In cash terms spending on credit cards has changed little in recent years, up only 5% in 2010 compared to 2005, which is a decline in real terms of 10%.  Since 2005 the number of active cards in circulation has also fallen from 70.6 million to 60.7 million (a drop of -14%), and the number of indivdual cardholders has decreased from 31.7 million to 30 million.

 

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