Britons favour debit over credit cards

The popularity of credit cards declined last year, as consumers increasingly favoured their debit cards, figures released today revealed.

Overall, a total of £273bn was spent on plastic cards during the year, outstripping cash spending for the first time, according to Apacs, the body representing card issuers.

More than two-thirds of plastic transactions were made on debit cards, which soared by 15% to £150bn. The number of transactions was nearly 10% higher than the number of credit card payments, at 3.7bn.

At the same time, however, use of credit cards grew at its slowest pace for more than a decade, with the number of cards in circulation rising by just 4%, and spending on them up just 8% at £123bn.

Apacs said on average, consumers had 2.3 credit cards each and 1.6 debit cards.

The average value of a debit card purchase was £41, with the average total purchase on each card reaching £2,317 during the year. The average purchase value on a credit card was higher, at £58, but the total annual spend came in at £1,455.

Even when consumers opted to pay for something in cash, Apacs said they were still reliant on their cards to get it, withdrawing a total of £146bn from cash machines during the year.

Despite their overall decline, credit cards still remain the most popular payment method when buying things online.

Apacs said last year an estimated 22 million people used plastic to make 262m purchases worth £16bn over the internet during 2004, with credit cards accounting for nearly three-quarters of transactions. It put the popularity of using credit cards for online shopping down to the extra benefits the cards offered, such as cover for lost or damaged goods.

The group expects the popularity of internet shopping to continue, and predicts that by 2014 there will be about 1.2bn transactions carried out online each year, with a value of £60bn.

Responding to today's report, Paul Green of Saga Services said findings of a recent Saga survey suggested the decline in the use of credit cards may be related to the introduction of chip and pin.

"Findings revealed that 78% of people with more than one credit or debit card use a different pin for each card," he explained.

"Therefore it is not unexpected that Britons are now cutting down on the number of cards they use on a regular basis. In fact, 14% of Brits - that's one in seven - say they have stopped using one or more of their cards.

He said his organisation was advising people concerned about remembering different pins to limit the number of cards they used and focus on those that offered them the most benefits.