How We Spend Money: Is Cash Back?
The way we spend our money is evolving. It’s a dance of technology, convenience, and changing economic landscapes. But as we tap, swipe, and click our way through transactions, a surprising trend has emerged in the return of cash.
But why? And what does this mean for the future of our finances?
UK Finance has taken a close look at UK spending habits, focusing on how we prefer to handle our transactions and why.
So what do we know?
The Reign of the Debit Card
Let’s start with the king of payments: Debit cards. A staggering half of all consumer payments were made on debit cards last year. It’s the reigning champion and the most popular method of payment. And it’s not just a fleeting trend. Over 95% of the UK population now owns and regularly uses a debit card. That’s a lot of plastic!
But why the surge? Is it the convenience? The feeling of safety? Or perhaps it’s the way we’re now shopping.
Small Purchases, More Often
Here’s a curious thing. We’re shopping more frequently, but spending less each time. Could it be a reaction to the rising cost of living? With soaring energy bills and grocery prices, it seems we’re opting for multiple smaller trips to the supermarket rather than one big haul.
And it’s not just groceries. We’re ditching travel cards and season tickets, choosing instead to pay for individual trips. It might cost more in the long run, but it gives us a sense of control over our finances. And in uncertain times, control is a comforting thing.
The Unexpected Resurgence of Cash
Now, let’s talk about the elephant in the room: cash. Remember when headlines screamed that cash was on its way out? Well, it seems reports of its demise were greatly exaggerated.
In 2022, cash was the second most popular way to make purchases. A total of 6.4 billion payments were made using those familiar notes and coins, up from 6 billion the previous year.
Why, when we have so many digital options, are we turning back to the tangible? Perhaps it’s a reaction to inflation fears and the rising cost of living. Cash can help us manage a tight budget, making our spending feel more real and more tangible.
It’s not the first time we’ve seen this trend, either. Remember 2008’s financial crash? A similar pattern emerged.
Contactless: The Quiet Revolution
Amidst all this, contactless payments are silently revolutionising the way we transact. In 2022, a whopping 17 billion payments were made contactlessly, up from 13.1 billion in 2021. And it’s not just the tech-savvy youth. Even retirees are jumping on the contactless bandwagon, with 87% making at least one contactless payment a month.
The reasons? Higher transaction limits and a growing trust in the technology.
The Slow Demise of the Cheque
And then there’s the cheque. Once a staple of our financial lives, it’s now fading into obscurity. A 14% drop in usage in 2022 alone. But it’s not gone yet. Why?
They’re secure, and they’re convenient when you don’t have someone’s bank details. Plus, with innovations like the Image Clearing System, depositing a cheque is now as easy as snapping a photo.
But with projections showing only 66 million cheque payments by 2032, it’s clear where the trend is heading.
So, What’s Next?
The landscape of our spending habits is a fascinating one. We’re embracing technology, yet there’s a nostalgic pull towards the tangible. We want convenience, but we also crave control.
As we navigate the challenges of modern life, one thing is clear: the way we spend our money will continue to evolve. But for now, it seems, cash isn’t going anywhere.
And that’s something to think about the next time you open your wallet.