What Are the Alternatives to Credit Cards?
Depending on your needs as a consumer, there are actually many ways to do business and make transactions without a traditional credit card account. Debt consolidation loans and predatory tactics like payday loans should be avoided at all costs. The credit card examples we’re about to show are much less risky than these pitfalls that target and exploit people.
What Options Are There In Lieu of Credit Cards, And Why Are They Good?
Many businesses have opted for cashless models, so having a form of payment that isn’t paper money has become essential. Luckily, you don’t need a credit card. Debit cards are basically instant checks – you swipe your bank card with its credit card logo front and center—and the money comes out of your checking account.
There’s a good and bad side to this. It’s convenient to be able to use a card to spend your own money, but it’s also really easy to overspend if you’re not careful.
For more information on how debit cards differ from credit and what situations are best for each, read this post explaining when to use debit versus credit.
Secured Deposit Credit Cards
These are like the diet soda of credit cards. You get the plastic card, the issuer label and the ability to spend – but the catch? You put up the money. For most purposes, these work just like a debit card. But the difference is you can only put so much money into the deposit side of these cards. You can deposit as much money as you like into a checking account.
If you’re a PayPal or Venmo user, these forms of payment allow you to connect your bank account or card to their platform so that you can use your funds through their service to pay for things and send money. Some of these services also issue cards that bypass the online platform but function in the same way by connecting with your banking information to issue payments. With these, you’ll need a bank account to use the service.
Cash is still king, and it spends. If you don’t need plastic or virtual payment options, cash is still a great way to do business.
What Are the Cons of Credit Card Alternatives?
When it comes to credit card alternatives, there are a few cons to be aware of before you pick a solution that’s right for you.
With cash, there’s the obvious issue of security. If your cash isn’t in your possession, it’s not really secure. And if you fall victim to any kind of theft, your cash isn’t insured.
With secured cards, we alluded to the issue – you can only put so much into these before you hit the deposit maximums. So these cards wouldn’t be great for large purchases.
When it comes to alternative payments, they can be glitchy from time to time, and there are processing fees involved with using their services – so there’s a convenience tax involved.
Lastly, debit cards can get you into trouble with overspending if you’re not careful. For instance, you could overdraft your bank account causing you to experience cash flow disruptions and to incur costly penalty fees. Additionally, once over-drafted, you could easily get behind on your monthly bills.
What About Building Credit?
If you’re thinking, “How can I build my credit without a credit card?” you’re not alone. A lot of people believe this myth that you need credit cards. You literally do not need credit cards to build your credit score. Paying your bills on time is a great way to build a positive credit history. If you’ve got loans, pay them on time as well.
When to Call a Credit Counselor
If you’re dealing with a credit card debt situation that feels bigger than you can resolve on your own or you’ve been falling behind on your monthly payments, it’s likely time to call a certified credit counselor to learn more about the process and programs available to you.