Cautious customers are turning from credit cards to cash and debit cards to better manage their finances research from the BRC showed.

The retail trade body also slammed banks for charging “unjustifiably-high” processing payments.

The study revealed that the proportion of transactions using credit cards in 2010 fell by 12.9% while the proportion involving debit cards rose by 15.8%.

Cash was involved in a smaller proportion of transactions than in the previous year earlier but that represented a greater proportion of overall retail spending as the average cash transaction increased by 13% to £12.93.

However, the BRC highlighted that retailers taking part in the survey paid out £659 million in fees for payment processing and cash collection. On average, each retailer paid 1.7 pence per cash transaction to have the money transported and banked, while the average charge for processing a credit card payment was 37.1 pence and debit cards averaged 9.2 pence.

Cash was used in 55% of transactions (11.5% of retailers’ payment costs), credit cards in only 10% of transactions (44.5% of retailers’ costs) and debit cards in 34% of transactions (37.5% of retailers’ costs).

With fraud losses down 37% through investment in new technology, BRC director general Stephen Robertson warned: “Hard-pressed customers are switching to cash and debit cards for the reassurance that they can’t spend what they haven’t got. At the same time, use of credit cards has dropped sharply. Cash remains king – used for more than half of all retail payments.

 “But unjustifiably-high payment charges are still being taken from retailers. Reducing the charges banks impose so they genuinely reflect the actual costs involved in processing these transactions is the right answer.” 

The BRC’s annual Cost of Payment Collection Survey includes findings from over 8bn transactions in stores and online, representing 60% of total UK retail sales, the largest proportion of UK retailing the survey has covered since it began in 1999. Total UK retail spending in 2010 was £292 billion.