After years of decline, cash withdrawals are again on the up

21 May 2012

After years of steady decline, the amount of money being withdrawn from cash machines has started to rise again.

£5.5 billion more was withdrawn in 2011 than in 2010, research commissioned by Channel 4 Dispatches reveals.

That's an additional £108 for every man and woman in the UK.

The figure is all the more surprising with the closure of some local bank branches and the increasing availability of cashless methods of payment.

Using credit and debit cards can be quick and convenient but for some during the economic downturn using plastic has meant losing control of spending.

The UK's total credit card debt now stands at £57 billion or £1,086 for every adult in the country.

There is evidence to suggest that using debit and credit cards can make us spend more.

For example, when fast food chain McDonalds started accepting cards in the US, the value of the average purchase went up by 47%.

Some financial experts suggest that psychologically it may be easier to be in control of your finances when using cash rather than plastic.

Personal Financial coach, Jackie Dunn says: "You put aside [cash] for your rent and your food and your social, and it's really very empowering to take something from a pile that's your particular money, your social account, and just go and spend it. "

 

Case Study  - The Theakers family

Channel 4 Dispatches put this to the test by asking the Theakers family from Kingsbridge in South Devon to try to use cash rather than debit or credit cards for two weeks.

The result, the family say, was a 15% reduction in their outgoings on day to day purchases - equivalent to just under £2000 over the course of a year.

The Theakers, parents Rod and Alison and daughter Ella, rarely use cash and admit that the debit card is their default method of payment.

"Actually I will use the debit card for just a tenner, in fact I spent about 3 pounds 50 on a debit card the other day", says Rod.

Like many British families, they are struggling financially with their outgoings just exceeding their income.

After the two weeks, the Theakers family agreed that cash transactions made a financial difference.

For Alison paying by cash was a "more real transaction than just pulling your card out".

"We spent about £426, so we are about £71 [less than usual]", says Rod.

"And I think that the main thing was that if we did that over a year, that could be nearly £2,000," says Alison.

 

Credit and Debit Cards Fees

The High Street banks are making billions of pounds each year from debit and credit card transactions

Every time a consumer pays by plastic, the card issuers get a cut. An average of 9p for a debit card and 37p every time you use a credit card. All those little charges add up.

In 2011 RBS made £1,088m income from credit and debit cards fees alone with

Lloyds on £877m; Natwest on £581m; and HBOS on £214m.

 

Whose interests does the Payments Council represent? 

In an interview with Channel 4 Dispatches, a former director at the Payments Council - the body with responsibility for ensuring that payment services work in the UK - says it represents the interests of the banks and not the consumer.

Martin Cave, a former independent director, says: "I think that the structure of the Payments Council didn't enable the consumer interest, or the public interest to be fully enough reflected."

When asked by Channel 4 Dispatches reporter Harry Wallop if the Payments Council represents the banks and not the consumer, Martin Cave replies: "Yes".

In 2010, the Payments Council attracted public criticism when it announced that it intended to do away with cheques even though consumers were still writing over three million cheques every day. Although Adrian Kamellard the CEO of the Payments Council accepts that the original decision to do away with cheques wasn't the right one and says this is why they are staying.

Adrian Kamellard, Chief Executive at Payments Council says: " We are developing an approach now which means that future decisions are going to be researched and are going to be exposed to the public in a way that it will inspire confidence of customers regulators, policy makers and government."

"We have had two new independent directors who have just joined us and they speak very strongly from the point of view of what consumers and the economy needs.

We have the consumer forum and their views are then fed up to the board and meant to be part of the decision making process."

Beating The Recession - Cash Versus Cards: Channel 4 Dispatches, Monday 21st May at 8pm

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