Why Use A Credit Card When There Are Alternatives

April 24, 2010

Are you one of those people who only ever got a credit card for the convenience of being able to pay without cash, or because you weren’t aware of any other easy way to borrow money? Millions of us are, thanks to tons of advertising by the credit card industry. Few people realize just how many alternatives to credit cards there are. Let’s take a look at a few.

Debit Cards

Basically, they’re just like credit cards and are accepted everywhere credit cards are accepted - the only difference is that they take any money you spend directly from your bank account, instead of you getting a bill at the end of the month. You should be aware,though, that you aren’t as well-protected from fraud with a debit card as you would be with a credit card.

Pre-Paid Credit Cards

These are cards that work just like credit cards, except that you can’t have a negative balance - you’ve to put money on the card before you can spend it. This means that you pre-pay the card, like you would a pre-paid mobile phone. This is good if you want to know how much you’re spending. They’re also safer than debit cards, since someone who stole the card could only spend whatever money was on it at the time.

Bank Overdrafts.

A good bank overdraft, used together with a credit card, can be a far better way of borrowing money than using a credit card. Your overdraft limit is set by the bank according to how much you get paid into your account each month, and you don’t need to pay it off until you want to.

Basically, it just gives your account the facility to go negative if you want it to. Many banks charge relatively high interest rates for overdrafts, but rarely as high as a credit card and they give much superior rates for good customers.

Real Loans

When you’re buying one big item at a fixed price (like a home) or you’re going to spend all the money on one type of thing (i.e home improvements), it’s worth budgeting it all out and going to a bank or another loan company. They’ll be able to lend you the money at a much better rate than a credit card would, simply because they know why you’re taking the loan and can set regular monthly payments for you to repay it.

Credit Unions

Credit unions are like banks, only more local. They’re co-operative, owned by their members and run by the community, and are a great place to borrow money. This is because there are limits in law on how much interest credit unions can charge, and they don’t need to make a profit for owners or shareholders, because they don’t have any. It’s well worth checking it out if there’s one in your area.

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