UK NEWS

DEBT FEAR HITS FLEXIBLE FRIENDS

SENSIBLE OPTION: More consumers are using debit over credit cards

Monday October 27,2008

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CREDIT card spending is expected to fall as consumers opt to use debit cards to try to keep their debt down, a report claims today.

The value of transactions is expected to ease by 1.1 per cent during 2008 to £120billion, while debit card spending will jump by 14 per cent to hit £438billion, according to market analyst Datamonitor.

It said the change was being driven by people spending less on expensive items, for which credit cards are typically used, as well as a reluctance to run up debt.

As a result, nearly three quarters of all card purchases made this year will be by debit cards, with credit cards used for only a fifth and charge cards making the rest.

The author of the report, Andrew Fabricius, said: “The fall in the value of credit card transactions reflects the fact that consumers are less confident about spending on credit and are spending less on large items, such as white goods.

“With fewer 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.”

But he said that credit cards remained popular with people shopping online due to the perception that they offered better protection.

People are also increasingly using debit cards rather than cash, with the cards now often used for smaller purchases for which cash would once have been used.

Spending on all cards is expected to rise to £594billion this year, compared with £536billion in 2007.