Credit crunch quashes plastic in favour of cash

There are reports of a growing trend to pay for goods with cash rather than credit cards. After years of dubbing Britain a “cashless society”, figures show that shoppers spent £5bn more in notes and coins last year.

The British Retail Consortium (BRC) have conducted a study recently and their results support this trend. The Cost of Collection survey shows that cash is now used for 60% of all purchases in the UK (totalling £264bn). This figure has risen up from 54% last year. And measured by value, cash is now used for 34% of retail spending, compared with 32% a year ago. This survey was carried out on 17,000 shops.

Despite the numerous credit cards on the market and all the “perks” they offer it would seem that, on the whole, British people are becoming very conscious of the “credit crunch” and are finding ways and means to tighten their belts somewhat.

Credit cards, when used correctly can be a very useful financial tool, but for those of us who are not disciplined enough NOT to spend money they don’t have, then perhaps they are better looking at alternative measures.

There are pros and cons to both paying by cash and using credit cards. Here are some examples :-

Paying by cash will make you more aware of your spending habits and probably force you to budget your finances to a certain degree. Also more of the smaller retailers are introducing a lower limit (generally around £10) before they will accept a card payment, thus forcing you to carry cash. One of their main reasons for doing this is to cut the amount they are being charged for processing a card, which according to the BRC is roughly 2p by the bank for a cash purchase, 8p for a debit card transaction and 34p on average for a credit card payment (usually charged by the card issuer).

Credit cards offer security in that often goods are insured, or you have a stronger case if they fail to arrive or turn up faulty. So many credit cards now carry ‘perks’ or ‘offers’ so you can get vouchers, cashback or all manner of treats for paying in this way.

One of the main differences between paying by cash or using credit cards is that should your cash be lost or stolen, then that is the end of it, whereas losing a card, you just call your card provider and cancel it, giving you peace of mind and only a minor inconvenience.

With the internet being such a popular tool to obtain goods, holidays etc, you will require to pay by card- whether it be credit or debit.

The key to getting the right balance is not how you spend, but rather how much you spend and the ideal situation would appear to be to use a combination of both cash and cards. The ultimate way to control your finances is to stay in the black (if you are using the cash option) and to clear your balances every month (if you are using cards).