Christmas credit card spending to drop

There were further signs that consumers are losing their appetite for credit today when the body representing payment card issuers said it expected credit card spending in the run-up to Christmas to fall for the first time in over a decade.

The Association of Payment Clearing Services (Apacs) said that while total UK spending in December was expected to reach £48.7bn - a rise of 11% on last year - the value of credit card purchases looked set to fall.

It said it anticipated credit card spending in December to total £11bn, 3.5% down on last year's figure of £11.4bn.

The body said credit cards would be the first choice of payment for shoppers buying gifts online, where additional insurances offered by credit card issuers would be most valuable. It also predicted that two-thirds of the expected £4bn online spend on plastic would be made on credit cards.

Overall, however, spending on plastic is expected to be 9.9% higher than in December 2004 at £28.8bn. Debit card spending is forecast to reach a new monthly high, adding up to £17.8bn.

This puts it ahead of spending on cash and cheques combined, which Apacs puts at £19.9bn.

Consumer spending on cards during December is usually more than 10% higher than in other months and Apacs said this year did not look set to buck that trend.

The average monthly spend on cards so far this year has been £23.8bn, and is forecast to rise to £28.8bn next month.

Sandra Quinn, director of communications at Apacs, said chip and pin meant debit cards were increasingly replacing cash and cheques for everyday purchases.

But she said consumers should consider the advantages of paying with a credit card.

"Although we actively encourage people to make sure they know how and when they are going to pay back any money they spend on their credit cards, there are some situations where they are the obvious choice for consumers.

"Not only do they remain ideal for high-value items which enjoy additional protection under the Consumer Credit Act, every canny consumer is well aware of the various financial benefits credit cards can offer: whether it's making use of the interest-free period to forestall payment, earning points on a loyalty scheme or, of course, cashback. "