Alternatives to Credit Cards

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Most people want a credit card, but unfortunately not everyone qualifies for one. The card issuer is extending credit and therefore is at risk of not being paid back. To avoid unnecessary risk there is an assessment of your credit report and history taking place, before your credit card application can be approved. Many factors are involved in this elaborate process and it varies from issuer to issuer. If the end result is a denial it can be anywhere from no credit history, no verifiable income, late payments reported on your credit report, too many credit inquiries to name a few.

When you are declined for a credit card, there are only a few options available at that point. Figure out what exactly caused the application to be denied and take the necessary steps to correct the issue, however that can be a lengthy process and you may have to look for other options.

A debit card is attached to your checking account and often issued free of charge, however there may be a charge for the checking account itself and it is not out of the norm to be charge upwards of $10 per statement cycle. That comes out to well over a $100 per year and not an expense you are likely to be able to afford if being approved for credit cards is an issue. Another thing to keep in mind is the overdraft fee if you lose track of how much money is left in the checking account.

The gift credit card is another option and that works very similarly to a regular credit card when used in a store or online. There is no pin-code to remember, but you need to sign the receipt just like you do a credit card. The best part is you are not at risk of going over the limit and incurring outrageous late payment fees, which makes the gift credit card a much wiser choice in that regards.

The major down side to not having a credit card is two-fold. First of all you are not earning any rewards, but a 1% cash back credit card is probably not to outweigh the many fees you could be charged for a credit card, not to mention the interest rates when carrying a balance. The more significant disadvantage is that hotels and car rental companies usually required a credit card on file, and being without can be problematic.

There really are viable alternatives to a credit cards besides carrying cash, you just have to look for them and consider if the debit card or the gift card is the best way to handle being without that little magic piece of plastic in your wallet known as a credit card.

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