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Hard up consumers turn to cash

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Date: Monday 21 Apr 2008

LONDON (ShareCast) - Cash is king again for a growing number of cautious customers who want to avoid spending money they haven’t got, according to the British Retail Consortium (BRC).

The number of transactions made in cash during 2007 rose to 60% from 54% the year before and up to 34% from 32% when measured by value, revealed a survey of 17,000 shops.

“Hard up customers are increasingly reluctant to spend money they haven't actually got in their hands,” said BRC Director General Stephen Robertson.

“While total retail spending continues to grow, there is a widening gap between the amount spent in cash and the amount spent using cards, suggesting customers want to keep tight control of their finances."

The BRC accuses card companies of pushing cashless payment methods to boost their own revenue, with retailers charged 34p for each card transaction against 2p for cash.

“These costs are too high for retailers to absorb and are inevitably passed on to customers in the form of higher prices,” said the BRC.

In a separate report, MoneyExpert.com said more than 3.24m credit card applications have been turned down in the past six months, around 18,000 every day.

The credit crunch has made lenders far more picky about who they lend money to, with 10% of applicants aged between 25 and 34 refused a credit card, more than any other age group.

"For years borrowers have had the upper hand in the credit card game but the rules have now changed,” said the financial comparison website's Sean Gardner.

“People with debts who thought they could keep shuffling their cards to stay ahead are now running into trouble.”