Convenient Alternatives to Credit Cards
- There are alternatives to credit cards for those who cannot get approved or who don't want to use credit.
- Debit cards and secured credit cards provide a similar experience for in-person shopping.
- PayPal and other online payment apps let you safely pay online.
When you’re trying to get 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 off what you have. In fact, most unsecured debt in the United States consists of credit card debt. But as society moves further away from cash and an increasing amount of everyday purchases are made online, credit cards seem to have become indispensable.
If you’re not using credit cards, how are you able to make purchases unless it’s an in-person transaction? The truth is, living without credit cards could be easier than you might think. There are plenty of alternatives to credit cards for making everyday purchases, regardless of your credit score.
Debit cards allow you to easily spend money from your checking account, making them one of the best alternatives to credit cards from a purely ease-of-use perspective. However, if you’re used to the flexibility of credit cards, you may have to be more disciplined about staying within your budget. To avoid overdrawing your account when using a debit card, 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 and use a debit card tied to that account for daily spending. That way you know the balance on your spending account is what you have to spend, and you can be more confident that you won’t accidentally spend money you need for more important things like your rent and utilities. In fact, that strategy could help you establish a better understanding of your budget and become more disciplined. Look for checking accounts with low or no monthly fees.
Reloadable prepaid cards
Similar to debit cards, reloadable prepaid cards may be used wherever credit cards are accepted but won’t expose you to the risk of taking on debt. You can find these wherever gift cards are sold (such as grocery stores and pharmacies) or buy them online from issuers like Visa, Mastercard, and American Express.
Keep in mind that you may have to pay transaction fees if you use ATMs that aren’t part of a particular network, as well as fees to reload the cards with additional funds. For example, you pay $2.50 per transaction (along with any applicable ATM operator fees) to use the American Express Prepaid Card at ATMs that are not affiliated with the MoneyPASS network.
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.
Secured credit cards
A secured credit card is similar to a prepaid credit card, and one of the best alternatives to credit cards if you’re trying to rebuild your credit. You deposit money into a savings account, and that money is used to set a credit limit and used as collateral (hence, it is “secured”). You’re still 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 prepaid credit cards, secured credit cards will report to the credit bureaus, so if make on time payments consistently, it may help to improve your credit profile. For this reason, secured credit cards could be a great option if you have a low credit score and don’t have access to credit cards with favorable terms. If used responsibly, they can help you restore your credit score.
PayPal and similar services
PayPal provides an online payments platform and is accepted by most online retailers (Amazon is one notable exception). This alleviates the need to have a payment card for online purchases and, like prepaid and debit cards, won’t add to your debt load. Also, PayPal offers a cash card in partnership with Mastercard that can be used wherever Mastercard is accepted (which makes offline purchases possible).
As with the other options discussed, PayPal charges transactional fees for cash withdrawals at unaffiliated ATMs (PayPal is part of the MoneyPASS network). They make the majority of their revenue by charging vendors transactional fees. Competing online payment services include Skrill, Google Pay, and Stripe.
Get professional help with your debt and finances
By discovering alternatives to credit cards, you’ll learn more about budgeting and improve your financial health. Learning how to deal with debt, everyday spending, and planning for your future doesn’t need to be hard. Our simple-to-follow guide will help you find the tools you need to move toward a better financial future. Get started by downloading our free guide today.