UK shoppers shift from credit to debit as higher rates bite

UK shoppers shifted away from credit cards and towards debit cards in 2024 as higher interest rates made borrowing more expensive, according to the British Retail Consortium's annual payments survey.

The BRC said credit cards accounted for 12.6% of transactions last year, down from 14.2% in 2023, while debit card usage rose to 64% from 62%. The shift reflects consumers favouring lower-cost payment methods as interest rates peaked.

Cash usage continued to decline but still represented around 19% of all transactions, with shoppers tending to use it for smaller purchases.

As the cost-of-living crisis eased, consumers made fewer overall transactions but spent more per visit.

Total transactions fell to 20.4 billion from 20.9 billion, while average transaction values increased across all payment types.

The survey found growing interest in alternative payment methods such as PayPal, gift vouchers and buy now pay later, especially for larger purchases.

Retailers again raised concerns over rising payment processing costs. Total card fees paid by merchants reached GBP1.48 billion in 2024, slightly lower than the previous year but more than double their 2019 level.

The BRC said long-term reform is needed to curb what it described as unjustified fee increases.

It called for meaningful action from the payment systems regulator and for momentum to continue when the regulator is folded into the Financial Conduct Authority next year.

Chris Owen, payments policy adviser at the BRC, said: "As interest rates peaked in 2024, the use of credit cards fell as customers switched to lower interest forms of payment.

"However, 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.

"Looking ahead, as the PSR transitions into the Financial Conduct Authority 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.