Your credit card application – you researched the market for the best credit card and applied. Now? You have been declined. What next? Here we take a look at credit card alternatives.
Credit card alternatives one – 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 our blog: Credit cards versus debit cards.
Credit card alternatives two – Use a prepaid debit card
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 solution for you 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 three – Apply for a payday loan or 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 payday or 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 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.
Credit card alternatives four – 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 as a debit card to your bank account, but also offers 1% cash back whenever you make a purchase.
Credit card alternatives five – An 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.
Credit card alternatives six – Use cash
The final alternative to a credit card is to simply 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.