Chip and pin is reducing credit card fraud

"Without plastic cards our society would virtually grind to a halt," the Association for Payment Clearing Services (Apacs) report concluded.

The report also revealed that card fraud had fallen in 2003.

Apacs credited the increasing use of chip and PIN to replace signatures as authorisation for the fall in fraud.

In 2003 the number of credit and debit cards in use grew by 13 million to 160.6 million, accounting for �243.9 bn of spending.

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By the end of 2004, �269bn worth of goods and services will be purchased using credit and debit cards, Apacs predicts.

Cash transactions are predicted to total �268bn.

The report revealed that card fraud fell to �402.4m in 2003. This is the first fall in card fraud in eight years.

Apacs said that the introduction of chip and pin card technology lay at the root of the fall.

The technology works by getting customers to verify a transaction by keying in a four digit Pin number rather than signing a receipt.

Card issuers and retailers are spending �1.1bn converting all credit and debit cards to chip and pin technology.

"Chip and pin is now rolling out across the country and puts Britain ahead of any other nation when it comes to fighting card crime," said Sandra Quinn, director of corporate communications at Apacs.

However, the prediction that cards payment are about to overtake cash may fuel fears that UK consumers are building up too much debt.

Last month, Bank of England figures showed that UK personal debt was closing in on the �1trillion mark.