Britain cuts back on credit card habit

Spending on credit cards has shown a year-on-year fall for the first time, according to figures from Visa, indicating that consumers are taking on board warnings about running up too much debt. Instead, shoppers are using their debit cards for their spending.

The data from the card group coincided with news of a surge in the number of calls to debt advice lines during the first two weeks of the year as borrowers took stock after Christmas.

Visa's UK arm yesterday said that the number of Visa-branded credit cards in the nation's wallets and purses had fallen by 3.2% to 42m. Total spending on credit cards fell by 3% to £85.2bn. The figures covered the 12 months to September 30.

Its data confirmed that debit cards are Britain's favourite way to pay. Over the same 12-month period, the number of Visa debit cards jumped 21.3% to reach 47m, while total spending on these cards hit £187.6bn - a rise of 30.5%.

With a debit card, the money is automatically taken from the holder's bank account within a few days of the purchase. Visa's figures suggest many people are heeding Barclays boss Matt Barrett's infamous comments about not racking up debts on credit cards. Mr Barrett, now the chairman of the bank, admitted in 2003 that he did not use credit cards to borrow money "because it's too expensive".

Colin Grannell, Visa UK's managing director, said a fall in credit card numbers and spending was not something that had happened before on a sustained basis, though he added that the surge in debit card use had more than compensated for this decline. The company said the media had generally done a good job of helping people to manage their money. "People are making decisions to use debit cards," a spokesman said. Economic factors may also have played a part, with some people perhaps feeling that "it is time to tighten their belts", he said.

The Association for Payment Clearing Services (Apacs) said recently that debit cards were increasingly replacing cash and cheques when it came to paying for small-value everyday items. However, credit cards remained more popular among online shoppers because many were aware that they offer some purchase protection.

Despite the fall in credit card use, Visa UK reported "strong" year-on-year growth, and said its plastic now accounted for £2.32 of every £10 spent on the high street. The company said the roll-out of chip and pin technology had been "highly successful" and had helped cut fraud. Just 0.084p of every £1 spent in Britain on a Visa card involved a fraudulent transaction - down from 0.1p a year earlier.

"The strong growth witnessed this year in debit card numbers and usage explodes the myth that Visa is simply a credit card brand," Mr Grannell said.

Meanwhile, record numbers of people were calling debt advisory services after finding they were struggling to pay back what they owe. The Consumer Credit Counselling Service took 9,310 calls in the first nine working days of the year - up almost 14% on the same period in 2005.

National Debtline also reported huge demand, receiving almost 13,000 calls between January 3 and lunchtime on Friday. The organisation admitted that the surge in demand had left it struggling to cope, with about two thirds of its calls going unanswered, although it said most people did get through on subsequent attempts.

It said it was in the process of recruiting 25 additional staff to add to the 55 employees who currently answer its phones in an attempt to meet the demand.