Brits turn to cash to ‘manage budgets’
New research suggests that the number of people using cash to pay for goods and services in the UK has significantly increased.
Intriguingly, the British Retail Consortium (BRC) found that customers paying by cash are 24% cheaper for retailers, compared to those who use credit cards.
As more people turn to cash rather than credit, the BRC believes that this helps to manage budgets and ‘prevent [people] spending money they haven’t got’.
Cash accounted for 58% of all transactions in 2011, increasing by 5.7% on the 2010 figures. Despite cash transactions increasing, the average shopping basket value has fallen from £12.93 in 2010 to £10.45 in 2011. High inflation in the second half of 2011 would have pushed up the price of everyday essentials, influencing the nation’s spending habits.
The ‘Cost of Payment Collection Survey’ found that the average cost to process a credit or charge card transaction for retailers is 36.2p, compared to cash which is just 1.5p.
Tom Ironside, British Retail Consortium Director of Business and Regulation said: "Customers have less money. They're buying things only as and when they need them, shopping more often but spending less each time, and they're more likely to be paying with cash.
"In 2010, financial worries were putting people off running up debt and they turned away from credit cards. Now times are even tougher and overall card use is down by 10.5% as people have switched to cash to better manage their spending.”
Whilst some consumers may be turning to cash to manage their budgets, others who are struggling to cope with the high cost of living are turning to credit cards and overdraft facilities.
Credit cards can be a useful way of using emergency funds if you do not have the cash. In some cases, the interest rates can be lower than the figures which banks and lenders charge for using an unarranged overdraft facility.