Credit Cards: Are They the Only Option for Borrowers?

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If you ask 10 Americans about the easiest way to borrow money, most likely, 8 of them will tell you: "Credit cards, of course". Credit cards indeed have become the most common and convenient means of getting credit for many people. Partly, as a result of credit card providers' aggressive advertising policy, partly, as a result of the convenience plastics give. Or, maybe such popularity of credit cards can be explained by credit consumers' unawareness about alternatives to credit cards?

In fact, you can find at least 4 other ways to borrow money. Let's take a look at these options.

Debit Cards

Debit cards can be called ancestors of credit cards. Such cards are especially popular in developing countries with a strong enough economy. Debit cards do not appear to be an actual substitute to credit cards. When making purchases with debit cards the retailer charges money from your bank. And it is not lender who provides you with a credit line, you, yourself, function as a creditor. In other words, before using a debit card, you will need to make a deposit that will be your credit line.

However, you can get an overdraft. This means that when you run out of money on your bank account, the bank can provide you with a relatively small credit line. And after you use the overdraft option, you are to pay the borrowed money back. You will be charged a fee and a certain agreed interest will be applied to the borrowed sum. But, as a rule, these rates and fees are lower than those charged by credit card issuers.

So, it is not even a debit card that gives you the same credit cards options, it is an overdraft option that makes a debit card a surrogate of a credit card. But actually, a debit card has an unarguable advantage over a credit product. With a debit card you do not need to bother about interest. You just do not have it. However, debit or credit is a question that lingers in minds of many people.

Pre-Paid Credit Cards

A pre-paid credit card functions just like a debit card. First you make a deposit that turns into your credit line and then use the card just like a regular plastic. It is accepted all over the place, where credit cards are accepted. What is the difference between a debit card and a pre-paid card then? The thing is that a prepaid card is a sub-type of a credit card and thus, it allows you to build your credit history. While a debit card does not give you such an opportunity. Besides, you will pay no interest or fees for using a pre-paid card. and what is more, with the lapse of time you can get a credit limit increase on your pre-paid card.

Actual Loans

When you plan to make a big purchase, like a car or a house, for instance, taking a loan at a bank or a loan company can be a good idea. The interest rate at which lending institutions will offer you a money loan will be significantly lower than the one offered by a credit card provider. With a house or a home loan, you will be obliged to pay off a flat agreed amount of money every month.

Credit Unions

A credit union is generally the same as a bank, but on a local level. It is a cooperative financial institution, owned and run by its members. The main difference from a bank is that a credit union is a non-profit organization. They do not depend on shareholders or higher authorities. Such unions charge lower interest rates on loans. If you become a member of a credit union, you will be eligible for taking a loan, getting a credit card, opening a savings account and for some other financial services.

How to get a membership? Credit unions can unite such social and territorial communities as people, who work, live, attend a school, worship together in some certain geographic area. These are the basic criterion. This, probably, is the best and most profitable of all credit card alternatives.

So, if you need to borrow money, consider several options and choose the one that is more beneficial for you.