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Debit and credit card spending to hit £594billion in 2008

27 October 2008 / by Rachael Stiles
The total value of transactions carried out using debit and credit cards this year is expected to reach £594billion, according to research from Datamonitor.

This is a rise of 11 per cent compared to last year's figure of £536billion.

The increase in spending on debit and credit cards is largely due to consumers switching from other payment types such as cash and cheques, which was seen in the first half of 2008 when the total value of transactions on plastic cards increased seven per cent from the same period last year.

While some consumers are turning to credit cards as the current economic climate takes its toll on household budgets, the growth in card payments is coming mostly from the debit card sector, with Datamonitor forecasting an increase of 14 per cent this year in the value of debit card transactions.

Despite their popularity because of the credit crisis, Datamonitor expects the use of credit cards to decline by 1.1 per cent this year, in line with the first half of the year when credit card transaction values were down 0.5 per cent.

Debit cards have become increasingly popular as consumers feel more comfortable paying for small purchases with a card, whereas before they would have used cash. It has also become easier to do so, with many retail outlets scrapping the minimum amount that can be paid with debit or credit card cards.

Consumers are also being encouraged not to spend what they don't have, as the credit crunch brings to light the risks of overstretching when it comes to debt.

"The fall in the value of credit card values reflect the fact that consumers are less confident about spending on credit and also are spending less on large items, such as white goods" comments Andrew Fabricius, financial services analyst at Datamonitor.

"Particularly with less people moving home, there has been less demand for goods such as household appliances and furnishings, which typically might be purchased with a credit card" he added.

Mr Fabricius continued to say that credit cards remain popular for shopping online, as consumers believed they offered better online security and protection, highlighted recently by the collapse of several airlines, when some consumers have been left out of pocket.

Datamonitor predicts that card payments will continue to experience strong growth in the coming years as we approach an almost cashless society, with the introduction of 'tap and go' schemes where cards can be quickly swiped for low value purchases instead of using cash.

But, he said that "Despite the strong growth in card use, we are still a long way from having a cashless society."

© Fair Investment Company Ltd