Paying for Christmas with money this yr? You’re not alone! More customers spending with notes and cash to assist price range

Cash accounted for nearly one in every five retail transactions last year, according to data from the British Retail Consortium. 

After a decade in decline, the use of cash increased for the second consecutive year in 2023, accounting for 19.9 per cent of transactions, up from 18.8 per cent in 2022.

While banks and building societies remain fixated on the digital drive, a growing number of people are turning to notes and coins to help them stick to a budget and keep track of their spending, the data suggests. 

It should be noted that the upturn in cash usage, may also, in part, have been partially linked to the demise of Covid-19 restrictions – and it is also way down on a decade ago.

Last week, the Treasury Committee heard from charities working with vulnerable groups and organisations which promote financial inclusion, as part of an inquiry into physical cash acceptance.    

The committee is exploring the barriers some consumers may face if they rely on cash to be able to access certain services.

Cash uptick: Coins and notes accounted for nearly one in every five retail transactions last year

Chris Brooks, head of policy at Age UK, told the hearing: ‘There are still a couple of million pensioners who don’t use the internet at all, and many more who lack the skills to use it proficiently.

‘And managing your money online is really challenging for a lot of people.’

He added: ‘People simply trust cash, so it’s a matter of trust.’

Deidre Cartwright, public affairs and policy manager at charity Surviving Economic Abuse, said: ‘Victims and survivors of economic abuse and domestic abuse more widely are dependent on cash for their safety and for their survival.’

Meanwhile, Conor D’Arcy, deputy chief executive of the Money and Mental Health Policy Institute, told the committee: ‘When we speak to people with mental health problems, it’s often for those very reasons that people really rely on cash often.’  

Stricter rules on ensuring banks and building societies offer access to cash have been unveiled by the Financial Conduct Authority. 

It said its new rules would require banks and building societies mulling branch closures to fill gaps in cash access with measures like banking hubs, cash machines and Post Office facilities.

Debit cards most common payment method

While cash usage increased for the second year in a row, debit cards remained the most common method of payment, making up around 62 per cent of transactions in 2023. 

Debit and credit cards combined made up over three-quarters of transactions in 2023, the BRC said.

Overall, customers visited shops more frequently but made smaller purchases, as the cost-of-living crisis continued to pinch last year, the BRC said.

The total number of transactions rose from 19.6billion to 21billion, while the average amount spent per transaction fell from £22.43 to £22.03.

Card fees paid by retailers continued to rise and the total amount paid by retailers to banks and card schemes rose by over 25 per cent in 2023, bringing the total amount in card fees paid to £1.64billion. 

Chris Owen, payments policy advisor at the BRC, said: ‘Persistent inflation and the cost of living crisis continued to affect households across the country and many consumers used cash to budget more effectively. 

‘However, the dominance of card payments continues apace, accounting for over 85 per cent of spending. 

‘Card fees continue to rise at a substantial rate and the PSR must act upon the harms it has identified in its current market reviews. 

‘It must move swiftly to reform the market and implement remedies including price caps on fees and price rebalancing measures.’ 

Graham Mott, director of strategy at LINK, told This is Money: ‘More people are choosing to pay with contactless cards and their phones and cash use is therefore falling. 

‘Our data shows that LINK ATM transactions are falling by around seven per cent a year, the total cash withdrawn falling by around 2 per cent. 

‘Since Covid, we’ve seen a continuing trend that although people are visiting cash machines less often, they usually withdraw more cash when they do.’

He added: ‘While there is evidence that some people are using cash to manage the challenges of the cost of living, others are reducing their spending overall, including cash. 

‘The UK is steadily becoming a low cash country, but some cash use will remain and it’s LINK’s job is to protect access for as long as people need it.’