Shoppers choosing cash over credit

Figures show that Britons used cash to carry out more than half of all transactions last year, despite claims of the demise of notes and coins.

According to the British Retail Consortium (BRC), 56% of all transactions were paid for using cash during 2008, and 33% of all retail spending was done using cash. However, the number of transactions in which cash was used was down from 60% in 2007.

The figures show that shoppers are favouring cash during the recession as a way of helping them set a budget to cut back on spending.

An average cash transaction costs retailers 2p, according to the BRC, while a debit card payment costs them 8p and a credit card payment 35p, making cash transactions a cheaper option and favourable at a time when companies are looking to cut costs.

The BRC said that if all payment methods were as cheap as cash it would save retailers £800 million, which could then be passed down to consumers through lower prices in shops.

It said that while it welcomes the technology of new payment methods, such as contactless payments, banks must reduce the charges that retailers pay when shoppers use these alternative ways to pay.

Stephen Robertson, director general of the BRC, said: "Reports of the death of cash are greatly exaggerated. Despite the impression created by some banks, it is the most popular way of paying and the cheapest for most retailers.

"But banks are pushing new cards and payment technologies hard. Not surprising when they stand to make so much more in charges."

He added that banks are continuing to charge for transactions to maximise profits at a time when they are protecting their own interests, but customers are bearing the brunt.