Debit cards to be number one for Christmas

The debit card is top of the Christmas tree.

For the third year in a row, December spending on the cards will outpace that for cash, according to estimates from the Association for Payment Clearing Services (Apacs).

As consumers gear up for Christmas and the New Year, the amount splashed out in December on debit cards will nudge £17.8bn - up by a fifth on last year, Apacs reckons. Our everyday spending using cash is expected to come in at £17bn, although its own year-on-year rise is more than a quarter.

Although still popular, credit card spending in December is forecast to fall by 3.5 per cent to £11bn - despite the extra consumer protection provided in the event of faulty goods, particularly when shopping online.

This is due to growing consumer concern about owing too much, along with rising figures for bad debts and bankruptcies, say debt specialists.

Banks have also begun to tighten credit lending after writing off a greater number of personal loans and credit card debts.

Apacs believes our willingness to turn to debit cards instead of cash for more of our daily spend stems in part from the introduction of chip and pin.

"It has made paying with plastic faster and safer, and so we're more likely to whip out the [debit card] for small-value transactions," says the Apacs spokeswoman, Sandra Quinn.

Although the new technology gives consumers exactly the same amount of protection as they had when they used a signature instead of a number - nothing to pay if defrauded unless grossly negligent - the pin system makes it harder for fraudsters to copy cards and go on spending sprees.

The debit card has also taken on added lustre in the current account war for new customers.

In February, the Halifax launched a current account offering 1 per cent cashback on all spending with its debit card.

The amount you can earn at 1 per cent, though, is capped at £100 (after shelling out £10,000). Any spending over this earns only 0.1 per cent.

You must pay in £1,000 a month to qualify for such a deal - so self-employed workers beware.

In June, HSBC launched a "price protection" incentive to tempt customers.

If you pay for a branded high-street good with your card and discover the same thing within 60 days in a rival store selling for at least £10 cheaper, the bank refunds the difference.