I read with interest the article here today regarding the rise in volumes of transactions on debit, credit and store cards (with a staggering increase of 77 million more purchases being made on cards in the second quarter of the year than in the first three months of 2017), and the value of spending also rising, accelerating by 7.2%.
As we continue to see a decline in cash transactions this volume increase should come as no surprise. The advent of contactless means this number is sure to continue accelerating. With inflationary measures, combined with this increase in volumes, I would expect to see an uplift in total spend on cards too.
But what this fails to highlight is the overall level of consumer debt and whether individual consumers are setting themselves up for a fall (should rates rise) or are they being disciplined and clearing down their debt on a monthly basis.
Personally over the last few years my spending habits have changed quite dramatically. I'm now much more likely to use my contactless credit card for the vast majority of transactions (thanks to greater convenience and the earning of loyalty points) than I am to use cash or my debit card. I obviously make sure I clear my outstanding balance every month so the credit card providers do not start making interest on my transactions.
So are we all doomed if interest rates rise or are we seeing more of a switch in customer behaviour being driven by convenience, customer loyalty schemes and an overall better customer experience?
UK consumers increasingly turned to plastic in the spring and early summer, with figures showing a rise in the use of credit, debit and charge cards. The number of transactions grew by 12% in the year to the end of June, the highest annual rate since 2008, according to UK Finance. The value of spending also rose, accelerating to 7.2%. Lenders face an upcoming deadline to prove to regulators that they are not lending recklessly. The Bank of England has consistently expressed the need for vigilance over growth in the consumer credit market during "benign" economic conditions, at a time when household income has been relatively stagnant.