While it can be unsettling to have your application for a credit card declined, there is no need to despair. There are plenty of possible substitutes for a credit card and below we share some of the most common card alternatives.
Credit Card Substitute: Use your Debit Card
Over the past decade, debit card ownership has increased by 45%, while the number of individuals who hold a credit card has declined by 14%. This marks a distinctive shift in our
spending behaviour, and debit cards do offer three advantages as compared to using a credit card:
- Unless you have an overdraft, you cannot spend more than you have – helping you to manage your money better and avoid debt.
- Because you are drawing upon a cash account it is easier to regard debit card transactions as exactly that – rather than free money for purchases made on impulse.
- Because of the availability of bank accounts, and the range of basic bank accounts suitable for the poorest of credit records, debit cards are available for those even with a bad credit history.
To understand the differences between credit and debit cards in more detail, read this piece on Credit cards versus debit cards.
Use a Prepaid Debit Card as an Alternative to Credit Cards
A prepaid debit card can be either a Visa, or a MasterCard, and can be used at any online or physical merchant store where these card types are accepted.
Prepaid debit cards are ‘topped up’ with cash, either through online bank transfers or over a bank counter. A prepaid debit card is a great substitute for a credit card if you need the convenience of being able to pay and withdraw by card, but are not great with budgeting and managing your money. They are also a useful solution for individuals who have just moved to the UK who may not credit score for a traditional bank account in the short to medium term.
Credit Card Alternatives Online: Apply for a Short Term Loan
Depending on your credit history and the reason as to why you needed a credit card, you may be eligible for a short-term loan. Whilst this is not the same as a credit card in that it provides a lump sum which is gradually repaid, such quick loans can actually be a more affordable solution for making a large purchase. You also benefit from the removal of temptation to repay the balance, only to borrow once again.
Considering short term loans without credit check you should be cautious. Click on the link to learn why.
Alternative to Debit Cards and Credit Cards: Use Cash
One of the most simple substitutes for credit cards is to use cash. This is perhaps the ultimate way of keeping track of what you are spending, as you physically hand cash over for services and goods.
You can still use cash to pay bills over the bank counter, even where you do not have the paperwork (as long as you have the account number and customer reference). Most banks will accept payments this way even when you do not hold an account, although there may be a charge for this privilege.
Card Alternatives: Choose PayPal
PayPal provides for all the convenience of a credit card when shopping online, as well as providing for the added layer of protection from fraud and faulty goods (a big advantage that no other payment solution offers, other than credit cards – as required by section 75 of the Consumer Credit Act).
Your PayPal account will be connected to your bank account, debiting each amount instantly. Today, PayPal also offers a speedier ‘one-click’ payment option, which makes checking out faster. Finally, another new addition to the PayPal line up is the PayPal debit card, which not only effectively works like a debit card to your bank account, but also offers 1% cash back whenever you make a purchase.
Another Credit Card Alternative is your Overdraft.
An overdraft can provide a convenient, affordable solution for providing extra cash when needed. However, and this point is important, an overdraft should only be used as and when it is needed. Unfortunately, all too many people use it routinely, each and every month, racking up interest in the process.
Not using your bank account and your overdraft responsibly can also lead to you incurring sizeable banking fees, despite there now being a limit on these fees per month. Nevertheless, using your overdraft for emergency purchases is a viable alternative to credit cards.
Finding a substitute for credit cards isn’t as difficult as it sounds. Some of the best alternative sources of finance can be as simple as:
- Using a debit card
- Making use of your overdraft
- Topping up a prepaid debit card
- Simply paying with cash
- Applying for a short-term loan
- Choosing Paypal
Sometimes it’s the simplest and easiest options that are the most viable.