The drop represents the first time overall spending has declined for three consecutive months since February 2013.
Visa UK & Ireland managing director Kevin Jenkins commented: “The figure provides further evidence that rising prices and stagnant wage growth are squeezing consumers’ pockets.
“The drop in spending was felt across a broader range of retail sectors last month, with clothing, household goods, food and transport among the worst hit.
“There were still some bright spots in July, with hotels, restaurants and bars reporting a 6% increase. The sector is likely to have benefited from an early surge in summer staycations, as the weak pound made holidaying at home more attractive.”