Alternatives to Credit Cards: Stay debt-free when you spend!

Credit cards’ days may be numbered. Consumers are switching to debit cards, pre-paid cards, secured credit cards, and online cash payment and dumping the old “Charge it” routine. Households trimmed a record $21.6 billion off the amount they owe in credit card debt and other consumer loans in July. Many consumers are frustrated with credit line reductions, rising fees, and tightening lending standards. Consumers under 21 years old will soon be unable to get a credit card without a co-signer or proof of their ability to repay. Whatever the reason, swapping credit out and cash/card alternatives in is a turn many consumers are making. Consider these options if you’re ready to do some debt-free spending:

Debit Card

So maybe you aren’t exactly freeing yourself from plastic, but you are certainly reducing your risk of incurring debt by removing your use of credit. With a debit card, every purchase you make withdraws directly and immediately from your checking account. If you can avoid overdraft charges and usage fees, then a debit card is a quick and convenient extension of your cash-on-hand that will save you from a credit card’s interest fees.

Secured Credit Card

A secured credit card is very similar to a credit card, except that it requires a security deposit from the cardholder which is used as cash collateral against any defaulted payments, and it also does not require a good credit score for approval. Secured cards are especially popular with consumers trying to build or rebuild credit because it allows cardholders to demonstrate good credit use even if they have little to no credit history or poor credit history. As a safeguard, secured cards typically have low credit limits to help stop consumers from falling back into significant credit card debt. We recommend the Public Saving Visa secured credit card. It has no annual fee and reports your credit activity to credit bureaus so you can build your credit history over time.

Pre-Paid Card

With a pre-paid card, you deposit money directly into an account and you make charges on the card until the account runs out of money. Pre-paid cards are a convenient way for young people to learn to keep themselves on budget as well as for people who may not have a bank account but want the freedom of using a card instead of relying on cash. While pre-paid cards do come with fees, AccountNow’s card offers the convenience of cash and the opportunity to build your credit in a pre-paid card.

Online Cash Payment

Online cash payment, like eBillme, is a convenient alternative for online shopping that pays through your checking account. You avoid interest rates, identity theft, and overspending since your purchases can only be bought with your own available funds (no more online impulse buys!). But, just like with pre-paid and debit, eBillme can’t help you to build your credit report or teach you how to use credit responsibly.

There are many benefits to switching from credit to cash, and ultimately, if you need some training wheels for credit use or want to kick your credit habit all-together, definitely consider the credit-free path of secured cards, debit cards, pre-paid cards, and online secure cash payment solutions.