Cash use dropped by 10% in 2012 as more shoppers paid by debit cards and alternative payment methods, according to a British Retail Consortium (BRC) survey.

The BRC Cost of Payment Collection survey found that more than half (54.4%) of transactions are still paid in cash, although it has declined as a proportion of both number of transactions (-6.7%) and money spent (-9.7%) - the first time in the survey’s 13-year history.

Credit and charge card use was down 3.4% as a percentage of transactions, but transactions made on debit cards rose by 3.2%.

Use of alternative payment methods such as Paypal, driven by online and self-service shopping, more than doubled to account for 5% of all transactions.

The survey also found that banks continued to levy high charges for handling card payments, with the average cost of processing a charge card payment 25 times higher than for cash. Credit and charge cards account for 10.6% of transactions but half (50.1%) of costs.

“Cash is still the most popular way to pay, but our survey shows how rapidly alternative methods are gaining ground. Retailers are investing to make sure customers have choice and convenience in ways to pay,” said BRC director general Helen Dickinson.