Card purchases now account for more than half of retail purchases made in the UK for the first time, according to the British Retail Consortium (BRC).
The body said card usage has grown, with debit cards overtaking cash for the first time, as more retailers have invested in payments technology to accept cards and "tap and go" contactless payments.
Many retailers also now accept new payments methods which allow people to use their mobile phone like a wallet, such as Apple Pay, Android Pay and Samsung Pay.
There were 10.3 billion retail transaction made on a debit, credit or charge card in 2016, accounting for 54% of all retail payments.
This five percentage point increase in the share of cards compared with 2015 means that cards now account for more than half of retail transactions for the first time, the BRC said.
The ongoing decrease in the average value of card purchases - from £30.53 in 2013 to £25.40 in 2016 - shows cards are increasingly used for lower-value transactions, partly driven by the wider use of contactless payments, the report said.
In autumn 2015, the transaction limit for a single contactless payment was increased from £20 to £30.
The results from the BRC Payment Survey conducted for 2016 were based on retailers accounting for nearly half of UK retail annual sales turnover, which in 2016 was £351 billion.
The report said: "It is the first time that cash has ceased to be the largest payment category with the share of debit card transactions growing by 4.5% to almost 43% of all retail transactions, overtaking cash transactions which saw a 5% shrinkage in its share of retail purchases to account for 42%."
Meanwhile, there were signs that people have become less reliant on their credit cards when making retail purchases, the BRC's survey found.
It said that consumers are borrowing less for day-to-day purchases, in contrast to a broader trend of increasing consumer borrowing in the UK.
Credit card payments for retail purchases shrank by value from £73 billion in 2015 to £72 billion in 2016.
Separate figures from Barclaycard show more than half (51%) of transactions up to the eligible spending limit of £30 are now made using contactless. Barclaycard said contactless payments are typically seven seconds quicker than Chip and Pin.
Tami Hargreaves, commercial director, digital consumer payments at Barclaycard, said: "With Barclaycard data revealing that more than half of eligible in-store card payments are now made using contactless technology and more innovation in the pipeline to enhance the use of mobile and wearable devices, we expect to see contactless spending go from strength to strength for the foreseeable future."