The constant steam of credit card offers you get through the mail and by phone tends to make you unaware of the other possible alternatives to credit cards.
There are five of the alternatives to credit cards listed below.
Debit cards are one alternative to credit cards that has been in operation for a number of years in many European countries, but are relatively new in other places. Debit cards are accepted in most of the places where credit cards are accepted, so they can be used in a similar way.
The biggest difference between the two cards is that debit cards take money directly from your bank account rather than you getting a bill at the end of the month. You must be made aware of the fact that you may not be as well protected against fraud with a debit card as you would with a credit card. Debit cards are also described as electronic checks.
Prepaid credit cards do not allow you to carry a negative balance, although these cards work just like regular credit cards do. Before making purchases with a pre-paid credit card, you have to deposit money into your card’s account; this means that you have to ‘top-up’ the card like you do with a pre-paid cell phone. This is one way to control your spending or you may want to give one to a child to help control their spending. Pre-paid credit cards are also safer than debit cards, if stolen because they could only spend whatever money was on it.
Bank overdrafts when used in conjunction with a credit card, might be a much better process of borrowing than the use of a credit card. Your overdraft limit is set by your bank according to how much you deposit into your account each month and you don’t need to pay it off until you want to. This allows you to let your bank account go into the red or have a negative balance. Many banks charge relatively high interest rates for overdrafts, but they rarely are as high as a credit card company’s and the better customer you’re considered to be, the better rates you’ll receive from your bank.
Another alternative to credit cards are the traditional loans. If you are planning on purchasing a single big ticket item at a fixed price, such as home improvements or a new car, it is probably better to try to get financing for your dreams through a bank or some other type of lender. These types of lenders will be able to lend the money to you at a much better interest rate than a credit card company would, since they know why you are needing the loan and they can set you up with regular monthly payments to repay it.
Credit unions is the last alternative to credit cards to be listed in this article. Credit unions are very much like banks, only more local; they are formed as a co-operative and owned by their members and run by the community, thus they are a good place to borrow money. The reason this is a good place to borrow money is because credit unions are limited by law on how much interest they can charge and they do not need to make a profit for shareholders or their owners, since they don’t have any. If there is a credit union in your area, it can be a solid alternative for borrowing and worth looking into.
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