Credit cards make it extremely to pay for goods and services whether it’s online, by telephone, or in person. Unfortunately, they also make it extremely easy to run up debts, which can get to a level where they threaten the financial wellbeing of the cardholder.
For this reason, a sizeable minority of people are reluctant to join the credit card bandwagon, and so miss out on all the benefits of using a plastic payment method.
This needn’t be the case, though, as there are alternatives to credit cards which let you enjoy all the convenience of a normal card without any of the associated risks.
This kind of card is almost standard issue with modern current accounts, and is fast becoming the most popular payment method in the UK. The most well known variants are Maestro (formerly Switch), and Visa Electron. They function in much the same way as a normal card, with the crucial difference that anything you spend is taken out of your bank account directly, rather than being added to a credit card balance.
Coupled with the fact that the transaction will not be authorised unless the account has enough money in it to cover it, this means that it’s nigh on impossible to run up problem debts using a debit card – at least so long as you don’t have a huge overdraft facility!
The major drawback is that they aren’t always as well supported as credit cards, meaning that the range of places in which you can use them will be smaller.
Prepaid cards are a relatively recent newcomer to the scene. They need to be ‘loaded’ or ‘topped up’ with funds before you can use them, in a similar way to a pay as you go mobile telephone. Once credited, they can be used in any situation a normal credit card can be, and in just as many places.
Obviously, this system also won’t allow you to build up debt, and so is pretty much risk-free. The drawback comes in that it can be a hassle to remember to keep it topped up, and it can also work out expensive as there will usually be a monthly fee as well as a transaction fee.
The final alternative is a charge card, which is a kind of payment card that actually predates credit cards by a number of years.
With a charge card, you need to repay your whole month’s spending in full when you receive your statement. You can’t carry a balance on from month to month, and you can’t build up debt. You could almost think of a charge card as being a normal credit card with the option to repay the full balance activated, and without the temptation to spend today and pay tomorrow.
So, as we can see, there are many ways in which you can enjoy the benefits and convenience of credit cards without running the risk of storing up financial problems for your future.