More shoppers are using debit cards as higher interest rates have made shopping using credit cards more expensive, according to research from The British Retail Consortium (BRC).

An annual payments survey conducted by the industry body found that the number of people using credit cards fell from 14.2 per cent of transactions to 12.6 per cent last year.

Meanwhile, the use of debit cards has climbed from 62 per cent to 64 per cent over the same 12-month period.

The use of debit cards peaked in 2021 when they accounted for 89.3 per cent of all transactions.

Despite their declining popularity, for larger transactions the survey found that consumers preferred using credit cards which offer additional protections for shoppers.

The BRC said that as the cost-of-living crises eased, many customers shifted back to old habits, such as doing a large weekly shop.

The survey also found that consumers are making fewer but larger transactions as the total number of transactions fell from 20.9 billion to 20.4 billion, while the average transaction value rose across all payment types.

While cash usage declined, the BRC said it still remains an important payment method for many customers as it accounts for around a fifth of all transactions.

The survey found that more shoppers explored less traditional payment methods than ever during 2024, particularly for larger transactions. This included the use of gift vouchers, PayPal and Buy Now Pay Later.

Elsewhere, the BRC said the cost of processing card payments remains high, with the organisation still campaigning for these to be reduced.

Total card fees fell slightly in 2024 compared with 2023, with the BRC pointing out that at £1.48 billion the fees paid by retailers have more than doubled since 2019.

The figures come after the Payments System Regulator (PSR) proposed increasing transparency on fees charged to merchants and acquirers in April.

The BRC said the move falls short of what is needed, calling for “meaningful” reform from the on card fees, such as a long-term price cap.

Additionally, the BRC called on the PSR, which is becoming part of the Financial Conduct Authority (FCA), to initiate a market review into commercial card interchange fees, which are currently eight per cent of each transaction to ensure the whole payment market is functioning effectively.

“With cards still accounting for the vast majority of transactions and card fees now more than double the level they were six years ago, only a long-term cap on card fees would bring much needed relief to retailers,” said Chris Owen, payments policy advisor at the BRC. “Looking ahead, as the PSR transitions into the FCA next year, it is vital that the FCA carries this work forward, delivering fairness and transparency in a market long hampered by competition issues and unjustified fee increases.”

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