What Alternatives to Credit Cards are There?

- by Isla Williams
A Guide to Credit Cards in the UK – Chapter 13

Are you looking for a way to borrow money, other than with a credit card? Learn about using overdrafts, short term loans and charge cards or borrowing from friends and family as alternatives to a credit card.

Chapter 13, Credit card alternatives- Cashfloat Chapter 13, Credit card alternatives- Cashfloat

For most people, when it comes to borrowing relatively small amounts of money, a credit card is the best option. They are fairly widely available and offer credit amounts which meet the majority of emergency or casual borrowing requirements. However, some people are unable to take out a credit card, because they have a poor credit rating or for other reasons. Other people just don’t want to have one. Often, this is because they want to avoid getting into the habit of spending on credit. While credit cards are what most people use to borrow money online, there are alternative ways to borrow, as we’ll explain below.

After you’ve read about alternative ways to borrow money, learn about ways that you can shop online, other than with a credit card. Many people don’t like to risk their card online and want to know what safer ways there are to shop online. Skip to the second half of this chapter to find out more about this.



Alternatives to Credit Cards for Borrowing Money

  • Use your Current Account Overdraft

  • Using an overdraft is a good option for people who do not need to borrow money regularly. Most current accounts come with an overdraft, of which some may be interest free. If you do not have an overdraft arranged with your bank or it is not large enough to cover what you need to borrow, then speak to your bank and see if they will be able to make the necessary arrangements.

    If you have an overdraft in place, which is large enough to cover what you need to borrow, then you can borrow from your overdraft. The catch with using an overdraft is that interest rates are generally higher (where interest is applied) than with credit cards and, on top of this, there can be additional fees as well.

    19 million people in the UK use arranged overdraft every year- Cashfloat 19 million people in the UK use arranged overdraft every year- Cashfloat

    For these reasons, overdrafts are generally a more expensive way to borrow money. However, they are useful for people who rarely need to borrow money or for people who can’t get access to a credit card. A point worth noting, for people who are unable to get access to a credit card and intend to use an overdraft for regular borrowing is that banks can take them away at short notice. If they deem that you are being irresponsible in your overdraft use, they may take it away.

    Before you borrow from your overdraft make sure that you check the terms and conditions of your bank account so that you know exactly how much it will cost. Many bank accounts come with an arranged maximum overdraft, of which some will be interest free and some will have an interest charge. Make sure that you understand exactly what the rules of your overdraft facility are before you borrow money from it.

    For in depth information about using an overdraft as an alternative to a credit card, go to Chapter 15 of this guide.

  • Short Term Loans

  • Short term loans, provided by companies such as Cashfloat, can make an alternative to a credit card. Cashfloat’s short term loans and small personal loans are most similar to what can be offered to someone who would otherwise have to apply for a new credit card.

    One major advantage of short term loans is that you can receive the funds much quicker than with a credit card. The time between applying for a credit card and receiving it can be weeks, whereas Cashfloat’s loans are often transferred into a recipient’s bank account within one hour of application. Also, new customers are often allowed to borrow more with a short term loan than they are with a credit card. Cashfloat offer short term loans of up to £1000 and small personal loans of up to £2500. Another upside to short term loans is that they are often available to people with a poor credit rating who are unable to take out a credit card.

    You could receive your Cashfloat loan within one hour of applying- CashfloatYou could receive your Cashfloat loan within one hour of applying- Cashfloat

    On the downside, short term loans tend to be more expensive than credit cards. Interest rates are usually higher and interest is applied as soon as a loan is provided. This compares to many credit cards which have an introductory interest free period and a lower rate of interest. The repayment conditions of loans may also be less flexible, meaning that if you have a change of circumstances or find it difficult to meet the repayment conditions, you may end up paying more than you originally planned. On top of this, some loans will require you to secure them with collateral, which will be at risk if you can’t make repayments.

  • Borrow from a Friend or Family

  • An obvious alternative to borrowing from a credit card provider is to borrow from a friend or someone in your family. In terms of cost, this is usually the best way to borrow money that there is. Most friends and family will not ask for any form of payment for lending you money. However, not everyone knows someone who can lend them money and, as with any loan, before you borrow money from friends or family, it is important to make sure that you will be able to repay it. Rather than risking interest payments, you may be risking your relationship with a friend or family member if you are not prompt in returning the money. For many people, harming a relationship is one of the worst things that could result from borrowing money.

    Often the most ideal way to borrow money is to borrow from a friend or relative- Cashfloat Often the most ideal way to borrow money is to borrow from a friend or relative.
  • Charge Cards

  • Charge cards are usually a luxury item and, generally, only make an alternative for people who are wealthy enough to afford them. As we explained in Chapter 8 of this guide, charge cards usually have to be repaid in full each month or expensive charges are applied. The borrowing options that they provide are not better than credit cards and they are generally inaccessible for people who have been refused a credit card because they have a poor credit rating.

    If you have the money available to finance a charge card and are looking for an alternative to credit cards that will provide you with a high spending capacity and attractive rewards then you should consider charge cards. If you do not have a good amount of funds at your disposal, then charge cards make a poor alternative to credit cards.

Ways to Make Payments Online Other than with a Credit Card

Many people feel uncomfortable using a credit card to make payments online because of the security risk. On top of this, debit cards are not a better alternative. Using a credit card to pay online does not put your whole bank account at risk, as is the case when paying with a debit card. As a result, many people look for other ways to make payments online.

For in depth information on the risk of credit card fraud and how to avoid it, go to Chapter 10 of this guide.

Over 20 million people in the UK use PayPal each year- Cashfloat Over 20 million people in the UK use PayPal each year.

Luckily, nowadays there are a number of alternative ways to make payments when you’re shopping online, which have become popular for precisely this reason. Read on to find out more.


Summary: Credit Card Alternatives

Credit cards are very popular and are most people’s choice when it comes to borrowing regular and relatively small sums of money. However, they do not suit all people and all circumstances. For a lot of people, the best alternative to a credit card is an overdraft. Short term loans are also a useful option and some people will be able to borrow money from friends or family instead. For those who can afford them, charge cards make a good alternative to credit cards.

When it comes to making payments online, most businesses are now very flexible and allow methods, such as Paypal, Amazon Pay and digital wallets, which are an alternative to using a credit or debit card. If you don’t already use one, why not subscribe to a service and see if you find it useful.

In the next chapter we will be looking at prepaid cards. We will explain what they are, how they work and which people will find them useful. After that, we will explain what people should think about if they are making a choice between a prepaid card and a credit card.


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About The Author
Isla Williams
A born writer, Isla had her first article published at age 9 in a local magazine. Isla's joy emerges when pen strikes paper, and she can tap into her creative self. "I love to share knowledge/information and help others to be in the know while being as friendly as I can.” Isla is an accountant by profession but has taken a break to do what she enjoys most - writing.
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* Cashfloat terms and conditions apply. Applicants must be 18 or over. All loans are subject to affordability, applicant verification and traditional credit checks via various national databases by Cashfloat responsible lending policy. In most cases, loan decisions may take up to 30 minutes during office working hours. If your bank does not support Faster Payments, funds will be sent to your account the same day as approval so long as you’re approved by 16:30.


Representative example: Borrow £700 for 6 months. 1st monthly repayment of £168.45, 4 monthly repayments of £224.60, last monthly repayment of £112.20. Total repayment £1,179.05. Interest rate p.a. (fixed) 185.39%. RAPR 611.74% Our APR includes all applicable fees. Daily interest is capped at 0.793%.


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