Plastic for the people - cash ditched for cards

People are spending more money with plastic cards than ever before, new research has revealed.

According to figures from banking industry body Apacs, consumers spent a record level of £26.4bn per month via plastic cards in the first half of 2006. This represents an increase of 4.9 per cent compared to June 2005.

A spokesman for Apacs told silicon.com: "It's just part of a trend. We're all using debit cards more than credit cards, and cards [in general] are being used more than cash."

The results come six months after high street retailers implemented chip and PIN technology in their shops with the intention of making card payments a more secure process.

Online auctions, such as eBay, are also seeing a rise in purchases. Last year £2.8bn was spent on auction sites, and more than half of all adults in the UK made an online purchase during 2005.

Banks and retailers are making it easier for consumers to leave cash behind - while now the main options for non-cash purchases are with cards, retailers are experimenting with new tools. The Co-op for example is piloting a biometric fingerprint payment system. And MasterCard and Visa are turning their attention to contactless payments.

But these are technologies for the future. Over the last six months, £151bn worth of purchases were made using plastic, 70 per cent of which were made using a debit card. Apacs said people are using debit cards rather than credit cards because they have become better at avoiding debt.

Further reading...

♦  Cheat Sheet: Chip and PIN
♦  Cheat Sheet: Contactless payments
♦ RFID credit card 'not a skimming risk'
♦ Visa to trial 'tap and go' debit cards in London

Apacs' spokesman said: "There are no surprises in that but people are taking more responsibility for managing their finances. They are heeding the messages about responsible spending and using debit cards because it's money they have, not money from a credit card."

Earlier this year Apacs reported that spending on debit cards had exceeded cash spending for the first time in the UK. Last year, cash transactions for online and offline retail amounted to £81bn (34 per cent) of the total £240bn spent, while cards accounted for £89bn (37 per cent).

A study from MasterCard found half of European consumers believe cash will be almost obsolete within 10 years. Out of the 3,000 debit card holders surveyed, 52 per cent said Europe will be cash free by 2016 but 48 per cent said they would still carry paper and coin currency.