Whatever we buy, we put it on the card

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The Independent Online

Do you still reach into your pocket for small change when you're buying a loaf of bread at the bakery?

If so, you could soon be in a minority, because more and more people are now paying for their groceries, and other small-scale purchases, with a credit card.

Over half of all spending on credit cards in Britain can now be attributed to everyday purchases, says a report from the Morgan Stanley Card Index - suggesting that traditional payment methods are coming under assault at all levels.

Its estimates of spending on small items using credit cards suggest a 4 per cent increase over the past three months, and an 11 per cent rise over the past six months.

Between April and June 2006, the average Briton will use their cards to spend £363 on items for the house and car and £315 on groceries, says Morgan Stanley.

Consumers are also more likely to shop around for their plastic in seeking rewards such as cashbacks, it adds.

This conclusion is backed by separate research from data analyst Total DM, which says that the number of credit card issuers offering a loyalty scheme - to attract and keep customers - has trebled in the past decade. In 1995, just 15 per cent of all providers ran such a scheme; at the end of 2005, nearly half did.

Card firms introduced these incentives to combat "rate tarts" - consumers who only stay with their providers for the duration of the 0 per cent introductory period.

Robert Kenley from the price-comparison service Moneysupermarket.com urges anyone who uses their credit cards for everyday spending - and, crucially, is able to clear their balance in full each month to avoid interest payments - to choose a product offering a reward.

Mr Kenley picks out the American Express Blue card, which pays 2 per cent cashback for the first three months and 1 per cent after that. He also likes the Egg Money card, offering 1 per cent cashback until 31 January 2007.

The Morgan Stanley Platinum card provides up to 2 per cent cashback until 1 September this year - after which it reverts to 1 per cent.

The card offers an annual percentage rate (APR) of 15.9, and a rate of 5.9 per cent for balance transfers.

If you are not going to pay off the balance in full each month, "you should look for an interest-free period," says Mr Kenley. "The Sainsbury's Bank Visa card, for example, is offering 0 per cent for 12 months on new purchases."

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