Cards to replace notes in our affections

Credit and debit cards are expected to overtake cash this year as Britain's most popular method of payment, according to a new industry report yesterday.

It will be the first time that card payments have outstripped cash outlay for goods and services. There are 246 plastic card transactions made every second.

Total plastic card use is expected to exceed £269bn in 2004, just a whisker ahead of the predicted £268bn for cash payments, said banking industry body the Association for Payment Clearing Services.

The group, which represents the major banks, said credit cards had become "demonised" as one of the main causes of ballooning debts, but added: "Without plastic, our society would virtually grind to a halt."

Last year, the number of plastic cards in use in Britain grew by 13m, or 9%, to 160m - the equivalent of 3.5 cards per adult. Two-thirds of card transactions are now made using debit cards.

Plastic accounted for £244bn of spending in 2003. "This year, total plastic card use, if business card usage is included, is expected to top £269bn. In 2005 it is expected that personal plastic card usage alone will overtake cash payments," said Apacs.

In terms of numbers of transactions, cash will remain much bigger than plastic for some time to come, it added. "Cash will always remain there for low-value payments."

Meanwhile, 2003 was the year that e-commerce "came of age" in the UK following the false dawn that was the dotcom boom. More than 18 million people bought goods or services online, up 50% on 2002. Credit cards accounted for 69% of the 200m transactions, with debit cards mopping up most of the remainder.

Last year was a landmark year for another reason - the first reduction in card fraud for eight years. Fraud losses on plastic cards fell by 5% to £402m as measures to combat crooks started to take effect.

A new generation of cards containing computer chips is being introduced, and by the end of this year most people making face-to-face purchases will have to type their four-digit Pin number into keypads at tills and will no longer have to sign receipts.

Apacs used the report, entitled The Way We Pay, to hit out at the largely "overwhelmingly negative" media coverage of the sector. The credit card industry in particular has been accused of irresponsible lending, a lack of transparency and being a driving force behind a consumer credit boom that threatened imminent disaster for the economy.

But the report claimed many of these criticisms were unjustified, pointing out that the vast majority of people used credit cards responsibly. It said the industry had made "significant strides" to address areas of concern, with "summary boxes" introduced on card marketing literature.