Shoppers made 4.4 billion payments using cash in 2024, for the first time accounting for less than 10% of all payments, according to UK Finance's UK Payments Market 2025 report.

However, whilst overall the use of cash declined in 2024, it is important to note that the use of cash is an important element of how some consumers manage their finances; e.g. many people find it easier to budget when using physical cash.

Over the next ten years, UK Finance expects the number of cash payments in the UK to continue the long-run declining trend. But they expect the rate of decline to slow down.

In place of cash, consumers are using payment alternatives like contactless payments, which have risen from 3% of all payments in 2015 to 39% of all payments in 2024.

Debit cards were used in 53% of all payments made by consumers and businesses in 2024.

What's driving the spending?

Contactless cards are being increasingly used for small purchases, whereas coins and notes would have been used previously. The average amount spent on a contactless card payment is typically around £16.

Hybrid working means commuters are buying more individual train tickets by debit card where they would have had annual or monthly season tickets pre-pandemic.

Anecdotal evidence suggested people are not doing as many 'big shops' at the supermarket, instead spending small amounts at a time, and visiting more frequently.

UK Finance still expects cash use to decline once the cost of living crisis eases over the coming years.

The Post Office tracks cash withdrawals and reports the data via their Post Office Cash Tracker. While January is typically a quite "cash withdrawal" month, the Post Office handled over £3.5 billion in cash deposits and withdrawals over the counter in January; personal cash deposits totalled £1.57 billion, up 2.7% month-on-month (£1.52 billion, December 2024) and up 10% year-on-year (£1.42 billion, January 2024).

Ross Borkett, Post Office Banking Director, said:

"Being able to access and budget with cash remains vital for millions of people every day, particularly in the New Year after a busy Christmas period. Many postmasters went to extraordinary lengths to keep their branches open and serving customers during the bad weather in January and that’s reflected in our figures with over £3.5 billion handled by postmasters and their teams last month."

It is not clear whether this is due to an increase in the use of cash, or because the number of high street banks has plummeted. The Post Office has partnerships with more than 30 banks, building societies and credit unions meaning 99% of UK bank customers can access their accounts at the Post Office.

Does spending in cash save you money?

For those living on very small budgets, spending in cash can be helpful as long as you stick to just spending what you've taken out and know you can afford.

The issue with cash budgeting is that there are many transactions which are done digitally or online. This is where budgeting with cash can come unstuck, as it's hard to keep on top of those few pounds here and there for things like public transport or an essential ingredient for dinner.

Having to hand over physical cash to buy something, and seeing that amount become smaller through the week, can certainly focus the mind and make someone more mindful of what they're spending.

One thing to bear in mind is that if you only spend in cash you won't be building up any credit history.

It can also be easy for that loose change to 'magically' disappear on frivolous things after breaking into a note, so discipline is key as with any money saving plan.

If you want to spend cash, it's worth making a note of the things you had to buy on card and deducting that from next week's cash budget.

Alternatively, you might decide to set up a dedicated 'spending' bank account where you put in a certain amount each month and only use that account for purchases.

Read more:

• NimbleFins Best Savings Accounts Guide

• How to avoid the subscription trap as £500m spend on unwanted accounts every year

• Average UK Household Budget

• Average Household Savings & Wealth UK