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Alternatives to Credit
Cards
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 the unavoidable advertising of
the credit card industry, and few people realise just how many
alternatives to credit cards there are. Let’s take a look at a
few.
Debit Cards
Debit cards are often used in many European countries, but are
relatively unheard of elsewhere. 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 have to put money on
the card before you can spend it. That means that you ‘top-up’
the card, like you would a mobile phone. This is good if you
want to know how much you’re spending, not to mention that you
can even give the cards to children. 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 gets 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 into
minus numbers, if you want it to. Many banks charge relatively
high interest rates for overdrafts, but rarely as high as a
credit card – and they will give much better rates for good
customers.
Real Loans
When you’re buying one big thing at a fixed price (like a car),
or you’re going to spend all the money on one type of thing
(home improvements, for example), 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 are
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 if there’s one in your area.
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