The latest figures from the British Retail Consortium (BRC) indicate UK consumers are increasingly turning from credit cards to cash and debit cards, with debit card transactions up 15.8 per cent in the last year. Research from moneysupermarket.com reveals insight into the spending habits of people using debit or credit cards, and how they regularly choose to pay for everyday ‘small transactions’ under £10 on their cards.
According to the research, over half of Brits (56 per cent) are using their debit card to purchase items under £10, with an average of 3.2 transactions a week. The research also revealed the average transaction was £6.34 meaning UK consumers are funding a whopping £560 million worth of small purchases on their debit cards; which amounts to just over £20 per week and over £80 per month for each individual.
Despite the decline in overall credit card usage found by the BRC, Britons’ spending on ‘small transactions’ still remains high, with almost a quarter of consumers (23 per cent) still funding small purchases on their credit cards. The average spend for these transactions is £6.63, and an average number of weekly transactions of 3.4, means the nation’s weekly bill for small transactions on credit cards is over £250 million.
Someone spending £22.50 per week on their credit card, £90 per month, risks paying an extra £105.06 in interest over 12 months if they fail to pay off their balance in full, meaning a cheap lunch can end up much more expensive than they realise.
The rise of contactless cards is likely to fuel the number of small transactions being paid for on credit. The UK Cards Association has already seen an increase in contactless card usage from 13.8m transactions in January this year to 15.1m in March, and we can expect to see these figures increase even further as more card providers issue contactless cards and retailers install terminals to accept these type of transactions.
Kevin Mountford, head of banking at moneysupermarket.com said: “Paying for a low-cost purchase using a debit or credit card is convenient, and with the onset of contactless technology, getting even easier. However it is easy to fall into a trap and be caught out by not keeping a close eye on these smaller transactions – they soon mount up.
“If you accidentally stray over your authorised overdraft limit or fail to pay off your credit card in full at the end of the month, it could end up costing you dearly and that ‘cheap’ lunch may end up being far more expensive than you anticipated.
“If you can’t afford to pay off your credit card in full each month don’t use it to pay for everyday spending such as your lunch or coffee on the way into work.
“For those who already have an outstanding balance on their credit card, it is important to look how to clear that debt as quickly as possible. Consider moving the debt onto a credit card offering zero per cent interest on balance transfers such as the Barclaycard Platinum with Extended Balance Transfer which offers 20 months interest free could be a good option.”
Source : Moneysupermarket.com
