Credit Card Alternatives: A Guide To Exploring 15 Different Options

But first: consider the benefits and drawbacks of using credit card alternatives

Benefits

• Increased security: certain payment methods have enhanced security beyond what a credit card features. Wire transfers, for example, are more secure and are typically used for higher transaction amounts for just this reason.
• No debt: using other payment methods, like cash, check, or ACH, make the payment directly, instead of using debt like a credit card.
• Easier to track: paying cash can make your finances easier to track. Particularly if you have multiple credit cards, it can start to become difficult to keep track of how much balance is on each, when payments are due, what the optimal rewards strategy is, etc. You can easily find yourself missing a payment and accruing interest charges, simply because you couldn’t keep track of it all.
• Lower interest rates and fees: credit cards have notoriously high-interest rates. It’s one of the most expensive ways to borrow money. If you need to borrow, you can often find lending solutions with much lower rates.

Drawbacks

• Lower rewards: most other payment options don’t have rewards for purchases like cash back or travel points. Since vendors pay credit card processing fees, most of the purchases you make have these fees baked into the price. So if you’re not using a credit card with rewards for most purchases, you’re effectively paying 1-2% more than everyone else on all your purchases. This can add up! 
• Not building credit: Not all other payment options will report to credit agencies. Making consistent, on-time payments helps build your positive credit history, which can help you earn lower rates on big purchases like a car or house. 
• Inconvenience: many other payment and borrowing options are more complex and difficult than the easy credit card swipe. Some other payment options also increase counterparty risk as well. For example, many people or stores will not want to accept a personal check, since they won’t know whether or not you actually have sufficient funds for the check to clear. 
• Cost: certain other payments may be more expensive than credit cards. For example, most banks will charge a ~$10-30 fee for either incoming or outgoing wire transfers, or both! 

10 Credit Card alternatives for making payments

1. Cash: good old-fashioned cash can be a great alternative for making payments. Cash is especially great for smaller transactions. However, for larger payments, typically over ~$1K, most people, and vendors may want a more secure payment type like a cashier’s check or wire transfer. Don’t forget you can use your credit card to get cash through a cash advance. 
2. Debit card: most people with a checking account have a debit card associated with it. While this method will work nearly the same as a credit card, debit cards typically do not accuse points or cash back. On the plus side, since they take the money directly out of your account at the time of payment, they also do not accrue interest, since you’re not borrowing money. 
3. Check: while decreasing in popularity, personal checks are still an acceptable way to make payments in most situations. If you’re making a payment for a higher amount, typically around ~$1K, you may want to check first that they will accept a personal check.
4. Apps like Venmo: these apps have been increasing in popularity in recent years for their convenience and speed. While usually used for payments among friends, they have been increasingly used by businesses too.  
5. Ask for invoice/payment terms:  this is a bit more unusual of a method and more typically used for business-to-business transactions. However, if you’re credit card is not working, or if you’re already at your credit line maximum, you could try asking for an invoice or payment terms that you will pay at a later date or over time as part of a payment plan. 
6. Wire transfer: this is the gold standard for high-value payments and money transfers. Wire transfers have higher verification and oversight requirements done between the two financial institutions initiating them on behalf of their customers. Remember to be extra careful, though, if someone is asking you for a wire transfer, they are also frequently a part of attempted scams since they can be more difficult to reverse once completed. Often, this can be the most expensive payment method. 
7. Electronic Funds Transfer: while typically used for business-to-business transactions, some financial institutions will let regular customers make EFT payments as well. The most common network to make these payments is the Automating Clearing House (ACH) network. 
8. Money orders or cashier’s checks: these are common payment methods for mid to high levels of payments. Think of something like a rent deposit for an apartment. These are commonly used in situations where the person accepting payment wants to be a little more sure that the check will clear. 
9. Pre-paid cards: if you can’t use a credit card, in some situations you may still be able to use a pre-paid debit card or gift card. 
10. Crypto: this method can be more complex than others for many people, especially if you’re trying to make the transfer off of an exchange. It can also incur additional fees. While some people think that this can be a way to make ‘untraceable’ transactions, the reality is nearly the opposite, for most protocols. 

5 Credit Card alternatives for borrowing money

1. HELOC: a home equity line of credit (HELOC) is a line of credit against the equity value of your home. You should consider the risks of pledging your home as collateral before opening one. However, they can be a good option if you’re very confident you can repay any funds withdrawn. Since the bank or lender has a valuable asset like a home backing the line of credit, they will often offer lower interest rates than other lending products. 
2. SBLOC: a securities-backed line of credit (SBLOC) works similarly to a HELOC as described above, except that instead of pledging your house as collateral, you pledge a brokerage account you own, which includes the value of the investment securities held. 
3. Other asset-based loans: sometimes referred to as “ABLs” or sometimes “Pledged Asset Lines,” this is a broad term that encompasses many different assets you can pledge as collateral to receive a loan against. For most people, HELOCs and SBLOCs are the extents of what they might ever use. However, depending on the bank they may accept many other types of assets as collateral, like boats, plans, and business assets like equipment. When I worked in private banking for Ultra High Net Worth Individuals, I saw ABLs for all sorts of assets, from high-end art to private jets to yachts.  
4. Personal loan: Most banks, financial institutions, and credit unions offer personal loans. While it will depend on your particular situation and especially your credit score and history with the financial institution, many people with good credit will be able to qualify for a personal loan of at least $20-50K. 
5. Friends and family: depending on how desperate the situation is, you could try borrowing money from friends or family. Make sure you pay back the money as agreed and promptly, though, or you risk destroying the relationship (or being sued!). 

Credit cards are a convenient way to make payments and borrow money short term.

But they’re far from the only solution.

Even though they have become ubiquitous in everyday life, don’t forget to take a moment to make sure you’re using the right tool for the right problem.