Credit and cash usage drop as UK consumers favor debit cards and digital payments

A new survey from the British Retail Consortium (BRC) reveals significant shifts in consumer payment preferences, indicating a move away from credit cards in favor of debit cards, while cash usage continues to fall sharply. The BRC’s annual Payment Survey, based on data from the past year, highlights changes driven by high interest rates and broader economic trends, alongside evolving spending habits.

The survey indicates a "significant decline" in credit card usage, which fell from 14.2% to 12.6% of all transactions. This downturn is largely attributed to consumers seeking lower-interest payment methods. Conversely, debit card usage saw an increase, climbing from 62% to 64% of transactions. Despite the general decline in credit card popularity, the report notes that consumers still prefer using credit cards for larger transactions due to the additional protections they offer.

Consumer spending habits also evolved during the period covered by the survey. As the cost of living crisis eased, a return to the traditional "weekly shop" was observed, resulting in consumers making fewer, but larger, transactions overall. This trend contributed to the total number of transactions falling from 20.9 billion to 20.4 billion, while the average transaction value simultaneously rose across all payment types. Cash usage continued its steady decline, accounting for just 19.2% of transactions, representing a significant shift away from physical currency.

Beyond traditional card payments, shoppers increasingly explored less conventional methods, particularly for larger purchases. The report notes growing usage of alternative options such as gift vouchers, PayPal, and Buy Now Pay Later (BNPL) services. According to Chris Owen, Payments Policy Advisor at the British Retail Consortium, this shift away from credit cards was directly linked to rising interest rates, prompting customers to switch to lower-interest options.

Owen also highlighted the impact of increasing transaction fees on retailers. While cards still account for the vast majority of payments, card fees have more than doubled in the last six years. He stressed that only a long-term cap on card fees would provide meaningful relief to retailers. Owen further urged that as the Payments Systems Regulator transitions into the Financial Conduct Authority (FCA) next year, it is vital that the FCA prioritizes delivering fairness and transparency in a market currently plagued by competition issues and unjustified fee increases.