Cash transactions prove cheaper for family budgets

paying with cash

paying with cashGone are the days when we would flash our credit cards to pay for goods, or so it seems, because we're finding it much healthier for family budgets to pay in hard cash.

The latest report from the British Retail Consortium (BRC) indicates that when it comes to shopping, customers are increasingly abandoning debit and credit cards in favour of coins and notes as a way of keeping an eye on their spending.

In 2011 more than half of retail transactions (58%) were made in cash - a figure which has increased from 55% in 2010 family budgets.

But the findings also showed that the total average value of a shopping basket dropped by £2.48 compared with previous years to £10.45. This is because more people in Britain are keeping a tight rein on their household spending as a result of the economic downturn, said the BRC.

A further 29% of transactions were made using debit cards in 2011, a figure which has tumbled from 34%. The figure for credit cards is lower, at a tenth (11%) of transactions.

How do cash transactions affect retailers?

Shop owners and managers are likely to welcome the news that we're using our cards less, because banks are charging "unjustifiably" expensive amounts for handling payments made with debit or credit cards, according to the BRC. As a result, it has urged the Office of Fair Trading (OFT) to step in.

Research from the Cost of Payment Collection Survey discovered that accepting cash instead of cards at the till is estimated to be 24 times less costly for retailers.

For them, processing a customer's payment by credit card will set them back 36.2p, while a debit card transaction will cost 9.6p. Compare those with the cost of carrying and banking cash - at 1.5p - and you can see why they might prefer cash transactions.

Busy parents can benefit from paying in cash

Retailers aren't the only ones who benefit from cash transactions - we do too! Paying for our family's necessities in pound notes and coins could be another way of helping us to manage our incomes and outgoing expenditure.

If you're yet to employ a strategy to limit your household's spending, drawing up a budget is known to help people have more control of their money.

In the research, people who were questioned said paying for items in cash "helps them manage their money and prevents them spending money they haven't got".

Not only that, but the study found that cash is the fastest way to pay - which is perfect for busy mums and dads on the go! It takes 27 seconds on average to use cash, in contrast to 36 seconds on average when a credit or debit card is used.

Tom Ironside, BRC director of business and regulation, said: "Customers have less money. They're buying things only as and when they need them, shopping more often but spending less each time, and they're more likely to be paying with cash."