Debit card spending hit record £59.1bn in July
A record high of £59.1 billion was spent on debit cards in July amid signs that the coronavirus pandemic is accelerating the trend towards internet shopping.
Debit card spending surged by nearly a fifth (17.9%) month-on-month and was also up by 9.4% compared with July 2019, UK Finance said.
It suggested that, amid ongoing economic uncertainty, people may be choosing to make more small purchases on their debit card, rather than using credit cards, which are typically used for “big ticket” purchases such as white goods and holidays.
Credit card spending remained below levels seen a year earlier.
Online card spending also reached a record high of £21.8 billion in July, reflecting a stronger shift towards online shopping as the pandemic has accelerated trends in consumer behaviour that were already there before the pandemic.
Two-fifths (41%) of total card spending by value took place online during July.
This was up from 30% in February, but down from a high of 46% in April when opportunities to spend in physical retail stores were more limited as a result of lockdown restrictions.
Eric Leenders, managing director of personal finance, UK Finance, said: “This data suggests the pandemic has accelerated the shift towards internet shopping, with card spending online reaching a record high in July.
“We are also seeing a marked increase in debit card spending, driven by the growing use of contactless as shoppers take advantage of the new £45 payment limit to make higher value transactions.”
The contactless limit for card payments was raised to £45 in April, and many shops have been encouraging people to pay by card during the coronavirus pandemic rather than using cash.
Contactless payments accounted for nearly six in 10 debit card transactions and four in 10 credit card transactions in July.
Contactless card spending totalled £8 billion during the month, up by 22.5% on the previous month and up by 11.1% on a year earlier.
The average value of a contactless payment reached £12.08 in July, compared with £9.42 in February.
UK Finance said the higher amount may partly be due to people being less likely to use public transport during the pandemic, while at the same time people are getting more in the habit of swiping their card for higher value transactions when spending in the retail and hospitality sectors.
A total of 1.2 billion card transactions were made in July – which was still 30.4% lower than in July 2019 albeit an 18% increase on June.
ATM withdrawals declined sharply at the start of the lockdown.
The UK Government set out proposals this week ahead of forthcoming legislation to protect access to cash.
Under the proposals, people would be able to use shops more like ATMs, as cashback without making a purchase in shops would be widely available.