Spending on credit cards has declined for the first time as consumers try to rein in household debt at record levels.
The number of Visa branded credit cards and the amount of money spent on them has fallen by 3.2% and 3% respectively. Some £85.2bn was spent on 43 million cards in the 12 months to September 2005.
Consumers would appear to be switching their preferred method of payment to debit cards where the cost of the transaction is taken from a current account within a few days of purchase without any credit facility. It means that there is no bill to pay at the end of the month and transactions will be declined if there isn’t money in the account or an overdraft arrangement to cover the cost.
Plastic now accounts for just over 23% of all sales on the high street and the advent of chip and pin technology has reduced the opportunity for fraud significantly. Less than 1 penny of every £1 spent in the UK is the result of a fraudulent transaction – a reduction of 16% over 2004.
A further incentive to tighten the collective consumer belt is the sinking performance of government bonds (gilts), which are the mainstay of the UK pension system. Because the returns on gilts are sinking investors will have to save a far bigger nest egg to get a decent retirement income and the shock of the sums required is scaring may consumers into ‘panic saving’.
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