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Death of a fiver - Plastic fantastic for smaller purchases

10th July 2013 Print

Plastic is increasingly replacing five pound and ten pound notes as more people turn to the convenience of cards over cash for ever smaller purchases.

Britons are regularly using credit and debit cards to pay for items which were once purchased with a fiver or less, new research for Debenhams Personal Finance has revealed.

Cards rather than cash are often handed over for coffees and snacks in local cafes, sandwich bars and pubs.

The study found a similar picture in newsagents and sweet shops with the purchase of magazines and confectionary now frequently made with plastic.

Debenhams looked at latest industry figures for spending by card in high street outlets where previously the bill would be settled with a handful of small change.

The number of transactions using credit and debit cards has risen by almost 40% from 7.4 billion in 2008 to 10.2 billion this year, but the value of the average transaction by credit and debit card has dropped.

A Debenhams survey found the trend is being led by younger adults who enjoy the convenience of plastic in their everyday spending for everything from a skinny latte to a glossy magazine.

Almost one in three (31%) 18-35 year olds said they used a credit or debit card for purchases under £10 at least once a week and 19% said they used plastic for purchases of £5 or under.

The study revealed that the top ten items purchased by card which cost £5 or under included a coffee in the number one slot, chocolate, sweets and crisps, second and soft drinks third. Newspapers, magazines and a pint of milk and a loaf of bread also made the list.

Those under 35 told researchers the main reasons for using a card was “convenience” and “not having to carry cash”. The savvy ones among them say they are also channelling their use of cards to certain providers who offer cash-back and loyalty schemes.

However, not all take card convenience for granted, with 7% of those that regularly use a card for purchases under a fiver admitting they frequently check with the cashier in a shop if it is OK to do so, or apologise for the transaction being so small.

Older people still prefer cash as a way of keeping a check on their finances, especially in the current difficult economic times and use cards for larger less frequent purchases. Only 5% of over 55 year olds said they prefer plastic to cash for small value treats.

Debenhams Head of Personal Finance Mike Hazell says: “Cash is still a big part of our lives, but for an increasing number of people, in particular the younger generation who have grown up with cards, plastic is the payment method of choice, even for relatively small, everyday purchases.

“They like the convenience and the benefit that some cards have of reward schemes. Others just don’t like carrying cash. It’s all down to personal choice.”

Our changing attitude to cards has been reflected in statistics showing frequent transactions for smaller amounts now are often put on our plastic. In coffee shops, the total spend on plastic is up 9%, but the average payment made by debit card has dropped to £8.48, compared to £11.20 a year ago.

The pub is another place where cards are increasingly being flashed to pay for a round of drinks. The debit card comes out when the bill comes to just over £20 with the average debit card payment being £22.78. A year ago a typical debit card transaction was £24.58

The picture is the same in restaurants where overall spending on cards is up 12% and a credit card is now used when the meal comes to an average £36.77. A year ago the typical bill making people reach for a credit card was £39.14.

Even topping up on groceries in the supermarket has seen an eagerness to use a card for smaller purchases with payment by card rather than cash – the debit transaction average is now £26.33 and on credit cards £34.