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Join Which? MoneyPost Office handles record amounts of cash - can it help you budget?
Find out how people are using cash to control their spending
More people are turning to cash to keep track of their spending as costs continue to rise, new data from the Post Office has found.
The Post Office handled £801m in personal cash withdrawals in July – the most since its records began.
Using cash can be helpful when you're trying to stick to a budget, and shoppers we spoke to said it gives them more control of their money.
But despite this, paying by card remains the most popular payment method, accounting for 57% of all transactions in 2021, according to banking body UK Finance.
Here, Which? explains how people are using cash to budget, and what steps are being taken to protect its future.
Is cash making a comeback?
The Post Office reported in July that personal cash withdrawals were up almost 8% month-on-month (£801m in July compared to £744m in June) and up 20% year-on-year (£66m in July 2021).
It said the record amount of cash withdrawals from its 11,500 branches are due to more people taking staycations in the UK, and relying on cash to manage their budget during the cost of living crisis.
It's only the second time personal cash withdrawals have exceeded £800m - it last happened in December 2021, but the Post Office says there is always an increase around this time of year.
Martin Kearsley, banking director at the Post Office, said: ‘Our latest figures clearly show that Britain is anything but a cashless society. We’re seeing more and more people increasingly reliant on cash as the tried and tested way to manage a budget.’
- Find out more: banking services on offer at the Post Office
How is cash being used to budget?
'Cash stuffing' is a budgeting method that has been taking social media platform TikTok by storm.
This works in a pretty simple way. Each month you withdraw the amount of cash you're willing to spend, then stuff it into envelopes labelled with different categories such as food shopping, nights out, savings and bills.
The theory is that handling cash makes you more aware of what you're spending, and as you've allocated set amounts for each category, you're more unlikely to go over your budget.
The trouble is, leaving large amounts of cash at home comes with the risk it'll be lost or stolen - and, if you're using an envelope to build up savings, that money won't be earning any interest.
As an alternative, you could consider withdrawing the amounts you need each week, rather than each month.
- Find out more: how to search for lost cash
‘I’ve deleted Apple Pay’
Since January, Marcio Delgado, 41, has started withdrawing £70 cash at the beginning of every week to spend on lunch, books, coffee shops and anything he needs on the go.
The journalist from London said: ‘I was getting shocked with the amount of money going out of my account while using contactless cards. I started to watch closely where the money is going and avoid spending whenever possible.
‘It’s incredible how using physical money makes you think twice before buying things.
‘I even deleted Apple Pay from my phone to avoid the temptation of using a faster method of payment for coffee shops.’
‘It’s a great way to top up savings’
Becky Derbyshire, 39, from Gloucestershire said she takes cash out on the first day of the month to pay for any essentials, including food.
The lifestyle blogger said: ‘I take cash out at the beginning of the month and pretend the rest of it doesn’t exist. Then anything I’ve left over from the cash goes into our savings account, and we start fresh the next month.
‘It’s been a great way top up the savings - which are now over £20k.’
- Find out more: how to find the best savings account
What if the store doesn't accept cash?
Many shops and restaurants began only accept card payments during the coronavirus pandemic.
Although some have returned to accepting cash, it’s up to the business what forms of payment they choose to accept - and there is nothing in the law requiring them to accept cash.
In 2020 we launched our Which? Cash Friendly Pledge - wherever you see the logo, you’ll know the business accepts cash.
- Find out more: what should you do with old £20 and £50 notes?
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Listen nowHow will cash be protected in future?
A new report published by UK Finance earlier this month predicts that cash usage will only account for 6% of all payments in the UK by 2031.
In 2021, cash was the second most popular payment method and accounted for 15% of all transactions. Although it does not anticipate a cash-free society in future, it does anticipate one where cash is less important.
Here are some of the measures being put in place to protect cash.
- Find out more: is your local bank branch shutting?
Financial Services and Markets Bill
First announced in the Queen’s Speech, the Bill will ensure people can continue to conveniently withdraw and deposit cash.
This will be monitored and enforced by the Financial Conduct Authority (FCA).
Since the Bill was announced, NatWest Group, Barclays and Lloyds Banking Group have announced dozens more branch closures. In 2022, 654 bank branches are set to close, and 15 are earmarked to shut their doors next year
The Scottish Affairs Committee of MPs have accused banks of ‘rushing to close [branches] before legislation to protect access to cash and banking services can take effect’.
With its new powers, the FCA could stop banks and building societies from closing cash access services if there was no suitable alternative within a reasonable distance.
Banking Hubs
In December last year, the Cash Action Group (CAG) - which is made up of eight major banks, as well as groups such as Age UK and the Post Office - announced a raft of measures to help maintain access to cash.
Any community facing the closure of a core cash service, such as a bank branch or ATM, will trigger an independent review by Link - the UK's main ATM operator.
Link will determine whether a new solution should be provided, and will have the power to commission services such as a shared banking hub or better Post Office services to meet the cash needs of the community as a whole - not just the customers of one bank or building society.
It's also now possible to get cashback without purchase at 2,000 shops across the UK.
- Find out more: banks announce access to cash solutions - are they enough?
Co-op pledge for cash machines
This month the Co-op pledged to help disadvantaged or isolated communities to avoid becoming ‘cash deserts’.
The supermarket said it will offer free ATMs at every store where possible and if not offer free cashback services or Post Office counter withdrawals where customers are dependent on the payment method.
- Find out more: ease the squeeze - latest cost of living news
