Credit where credit's due - plastic overtakes cash for the first time

SPENDING on credit and debit cards has overtaken cash spending for the first time, it was revealed yesterday.

British shoppers are expected to have spent 269 billion using plastic during 2004, compared with 268 billion in cash payments.

The Association for Payment Clearing Services has calculated that a transaction made at 10:38am yesterday was the point at which plastic became the most popular payment method.

Experts think that the shift towards plastic has been driven by the convenience and security of card transactions. Nine in ten people own at least one credit or debit card.

The news comes as Halifax prepares to launch an innovative current account in February that pays customers cashback of 1 per cent of spending on debit cards.

The account is likely to shake up the current-account market, which is dominated by the big four banks: Barclays, HSBC, NatWest and Lloyds TSB.

Paul Freathy, a director of the Institute for Retail Studies at the University of Stirling, said the findings were proof of a move towards a cashless society.

Mr Freathy said:

"Using cash transactions is more risky for retailers, as they are liable if the money is stolen, whereas it is the debit-card companies which take responsibility if money is lost through them.

"Debit cards are unlikely to replace small-change purchases, but with an increase in online buying they will continue to be used more and more," he added.

"Debit cards are a good thing for the consumer, as it means they don’t have to carry round large sums of cash and, given that we now consume in one-stop-shop-style premises, for example in supermarkets, it’s easier to use a debit card than to go back and forth to the cash point if you run out of money."

He added: "It’s safer and more secure to use plastic, and now that we can also use our cards in shops on the Continent, they are going to have an impact on travellers’ cheques."

Stuart Glendinning, marketing director of the personal finance website warned that some people should stick to using cash if they have a history of getting into debt. He said: "Using plastic cards is a good thing for most people, as it offers the benefit that your money is covered by insurance. However, it isn’t so good for the less disciplined, who shouldn’t use credit or debit cards.

"A plus for using debit cards, though, is the fact that you aren’t restricted by the 200 limit that most accounts have on ATM [automatic teller machine] withdrawals, as you can easily spend more than that in a day, especially at Christmas time.

"I think the convenience will keep people using their debit cards, and with internet shopping really starting to kick in, we are seeing a result of our ever-increasingly busy lifestyles, where we don’t have time to stand queuing at ATMs."

There are more than 130 million plastic cards in use in the UK - with debit cards accounting for 65 per cent of card spending.

The first charge card was launched in the UK in 1951, allowing shoppers to delay paying for goods until the end of the month.

It was not until June 1966 that the first full credit card - the Barclaycard - arrived, allowing consumers to extend the period over which they paid, as long as they covered a specified minimum.

The first debit card went into operation in 1987.

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