Cash Payments Resurge Amid Economic Turbulence, Yet Debit Cards Reign Supreme

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The previous year witnessed a surprising increase in cash payments for the first time in ten years, driven primarily by consumers grappling with an inflating economy. This uptick in cash use, however, is still significantly outshone by the prevalence of debit card usage, presently responsible for half of all payments – a historical peak.

Many consumers express a preference for cash, citing ease of money management as a significant reason. However, the organization which gathered these statistics, UK Finance, anticipates that cash usage will likely recede in the years to come, as economic turbulence subsides.

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Interestingly, even amidst soaring living costs and the emergence from pandemic-induced lockdowns, nearly 22 million individuals used cash only once a month or not at all in the past year. This starkly contrasts the slightly less than one million predominantly cash users.

Increases in hybrid working conditions appear to have augmented card usage. Debit cards continue to be the payment method of choice, particularly for low-cost, contactless in-store purchases – a domain once ruled by coins. The average contactless payment via card was found to be £15.10.

Last year saw a surge in debit card usage, with it making up half of the 46 billion payments done by consumers and businesses, as per the data from UK Finance. Among consumers themselves, debit cards were used in 57% of transactions.

Elements of this increase were attributed to hybrid working scenarios, where parts of the week are spent remote working and others commuting to the office. This change in work style led to less frequent travel but a higher number of transportation payments.

This shift in consumer behavior resulted in a noticeable dip in the purchase of annual or monthly season tickets with more frequent individual journey payments via debit card becoming common practice. The statistics also include payments made through cards loaded onto smartphones and watches.

The research further noted a change in shopping patterns, with consumers showing a tendency to make smaller, more frequent purchases at supermarkets, rather than opting for a single bulk purchase.

Economic constraints have also driven consumers to engage in frugal grocery shopping as an attempt to manage tight budgets. As a response to these conditions, physical cash saw a 7% increase in usage last year, scaling up to 6.4 billion payments as compared to the preceding year. Despite its popularity, it only made up 14% of the total payments, with card usage far ahead.

An increased demand for digital payment methods was observed in 2022, including contactless, online banking, and mobile payments, but some individuals favored cash for the sake of budgeting amidst financial challenges.

Sarah Maxwell-Scott and Debbie Clark, casually enjoying a cup of coffee together in South East London, embody this diverse preference. While Maxwell-Scott, who works as an accountant, admits to a card-preference driven by shop tendencies and convenience, her retail assistant companion, Clark, prefers cash to keep a clearer track of her spending.

Despite the decline of the traditional cheque, certain banks have faced fines for failure to provide free access to cash withdrawals. This has ensured cash access within a mile for urban dwellers and within three miles for rural residents. A notable increase in cash transactions between June and August was recorded by the Post Office network, catering to those who favor cash, particularly in areas where bank branches have ceased operation.

For those looking to save on their food shop, a few handy tips might be a careful perusal of existing cupboard stocks, prioritizing the reduced section in the store, buying close-to-expiry items at reduced costs, and making good use of the freezer.