Want to pay for Christmas in cash this year? You are not alone! More customers are spending money with notes and coins to help the budget

According to data from the British Retail Consortium, cash was responsible for almost one in five retail transactions last year.

After a decade of decline, the use of cash increased for the second consecutive year in 2023, accounting for 19.9 percent of transactions, up from 18.8 percent in 2022.

As banks and building societies remain fixated on the digital drive, a growing number of people are turning to notes and coins to help them stick to a budget and track their spending, the data shows.

It should be noted that the revival of cash use may also be partly related to the demise of Covid-19 restrictions – and is also well behind what it was a decade ago.

Last week, the Treasury committee heard from charities working with vulnerable groups and organizations promoting financial inclusion, as part of a review into the acceptance of physical cash.

The committee is examining the barriers some consumers may face if they rely on cash to access certain services.

Chris Brooks, head of policy at Age UK, told the hearing: ‘There are still a few million pensioners who don’t use the internet at all, and many more who don’t have the skills to use it proficiently.

‘And managing your money online is quite a challenge for many people.’

He added: “People just rely on cash, so it’s a matter of trust.”

Deidre Cartwright, public affairs and policy manager at the charity Surviving Economic Abuse, said: ‘Victims and survivors of economic abuse and domestic abuse more broadly rely on cash for their safety and for their survival.’

Meanwhile, Conor D’Arcy, deputy director of the Money and Mental Health Policy Institute, told the committee: ‘When we speak to people with mental health problems, it’s often for those reasons that people often rely on cash.’

The Financial Conduct Authority has unveiled stricter rules to ensure banks and building societies provide access to cash.

It said the new rules would require banks and building societies to close branches to fill gaps in access to cash with measures such as banking centres, ATMs and post offices.

Ron Delnevo, chairman of Payment Choice Alliance, told This is Money: ’15 million adults are budgeting with cash – that’s one adult in every two households in Britain – because they are struggling to keep their heads above water. With so many people using cash to budget, cash use would undoubtedly increase.”

He added: ‘There are also more and more people waking up to the threat of identity theft (nearly two million cases last year) and other potential online disasters. These people use cash more because it cannot be hacked itself and of course it does not crash if IT systems fail.’

Debit cards are the most common payment method

While the use of cash increased for the second year in a row, debit cards remained the most used payment method, accounting for approximately 62 percent of transactions in 2023.

Debit and credit cards together accounted for more than three-quarters of transactions in 2023, the BRC said.

Overall, customers visited stores more often but made smaller purchases as the cost of living crisis continued to weigh last year, the BRC said.

The total number of transactions increased from 19.6 billion to 21 billion, while the average amount spent per transaction fell from £22.43 to £22.03.

Card fees paid by retailers continued to rise and the total amount paid by retailers to banks and card schemes rose by more than 25 percent in 2023, bringing the total amount of card fees to £1.64 billion.

Chris Owen, payments policy adviser at the BRC, said: ‘Persistent inflation and the cost of living crisis continued to hit households across the country, with many consumers turning to cash to budget more effectively.

‘However, the dominance of card payments continues and accounts for more than 85 percent of expenditure.

‘Card rates continue to rise significantly and the PSR must take action on the harms it has identified in its current market research.

“It must take swift action to reform the market and implement solutions, including price caps on reimbursements and measures to rebalance prices.”

Graham Mott, strategy director at LINK, told This is Money: ‘More and more people are choosing to pay with contactless cards and their phones and the use of cash is therefore declining.

“Our data shows that LINK ATM transactions are declining by approximately seven percent per year, while total cash withdrawals are declining by approximately 2 percent.

‘Since Covid, we have seen a continuing trend that although people go to the ATM less often, they usually withdraw more money.’

He added: ‘While there is evidence that some people are using cash to meet cost-of-living challenges, others are reducing their overall spending, including cash.

‘The UK is steadily becoming a cash-poor country, but there will be some use of cash and LINK’s job is to protect access for as long as people need it.’