Cash payments account for only 20% of spending as cards take over first time

Credit card spending has overtaken cash payments for the first time as the latter accounted for only just over 20 per cent of purchases in 2018.

The British Retail Consortium (BRC) said the popularity of plastic last year pushed cash into third place, with debit cards remaining the most popular payment method.

Last year, debit cards accounted for 56.8 per cent of sales by value, while credit and charge cards accounted for 21.5 per cent and cash made up 20.4 per cent of the total.

It meant that plastic accounted for nearly 80 per cent of retail sales by value last year.

Cash was used to pay for £77.7 billion worth of goods in 2018, compared with £80.6 billion in 2017 when it accounted for 22 per cent of sales value and credit and charge cards made up 20.8 per cent.

But in terms of the volume of payments made, cash remained the second most popular payment method, with coins and notes still commonly used for smaller transactions.

Last year, 9.3 billion transactions were made by debit card, 7.7 billion were in cash and 2.6 billion were made using credit and charge cards.

The average value of a cash payment last year was £10.21, slightly down on £10.78 in 2017.

The BRC said the average value of a payment made in cash had remained around £10 for several years.

The average transaction made by credit card had a higher value, at £31.71.

The BRC also said total UK retail sales increased by 4.1 per cent to £381 billion in 2018, from £366 billion the previous year.

There were 20.1 billion transactions in a single year - or more than 55 million per day - up from 19.8 billion in 2017.

Card costs continued to rise, the BRC said, as retailers spent £1.3 billion with third parties just to accept payments from customers, up £70 million from 2017.

Each transaction costs retailers an average of 5.85p.

Cash remains the most cost-effective payment acceptance channel for retailers, with cards being more costly to process, the report said.

The BRC is calling for action to improve regulation of card payment fees.

It also said Brexit could see retailers paying "significantly more" to accept foreign-issued cards.

Andrew Cregan, BRC policy adviser, payments and consumer credit, said: "With card payments accounting for almost 80 per cent of retail sales, it is vital that the Government takes action to tackle the soaring costs that card companies charge retailers.

"Without action, we will see businesses put under further pressure and it will be consumers who are forced to pay the price."

The BRC's survey was completed by retailers who represent over a third (34 per cent) of UK retail annual sales turnover.