Credit Card Debt

3 Convenient Alternatives to Credit Cards

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When you’re working on getting out of debt, it’s often necessary to stop using credit cards so you can avoid taking on new debt while you work to pay down your existing debt.

Thankfully, living without credit cards is easier than you might think. There are other convenient options for making everyday purchases, regardless of your credit score.

Here are three alternatives to traditional credit cards that you can use for convenient daily transactions:

1. Debit Cards

Debit cards allow you to spend money from your checking account as easily as credit cards. However, if you’re used to the flexibility credit cards you may have to be more disciplined about staying within your budget. To avoid overdrawing your account, keep track of how much you can spend vs. how much needs to be in the account to pay bills.

You might want to open a separate checking account, or use a pre-paid or secured credit card, for daily spending. That way you know the balance on your spending account is what you have to spend, and you can rest easy knowing that you won’t accidentally spend money you need for more important things like your rent and utilities. Look for checking accounts with low or no monthly fees.

2. Reloadable Pre-Paid Cards

You can find these wherever gift cards are sold or buy them online from issuers like Visa and Mastercard. You may want to do a little research to find the ones with the best terms and lowest fees. For example, some are protected from loss and theft, under certain conditions, while others are not. All of these cards have some type of fee, but beware of cards that have high fees that can eat up the balance quickly.

3. Secured Credit Cards

Ask your bank or credit union about a secured credit card, which is similar to a pre-paid credit card. You deposit money into a savings account, and that money is used to set a credit limit and as collateral for the credit card. You’ll receive statements and are required to make payments toward your balance, but if you can’t pay, the bank or credit union will take the money from your savings account.

Unlike pre-paid credit cards, secured credit cards will report to the credit bureaus, so if you pay it off on time consistently, it may help to improve your credit profile.

In addition to the convenience, you may find that using pre-paid forms of credit helps you manage your money better by creating realistic spending limits. By learning to live without credit cards and discovering other alternatives, you’re doing, even more, to build your financial skills for the future. Keep up the great work!

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