Credit card alternatives

Tired of all the credit card fees? Swamped in debt from your plastic habit? Maybe you can’t even qualify for a credit card. More and more folks are turning to alternatives. Here are some options.

1) Credit union credit cards

Two Harvard doctoral students found that credit cards from credit unions were less likely to charge fees and penalties that big banks do. And when fees are involved, those fees are less. To join a credit union, you typically need to be a member of some kind of organization. Ask your employer or your college alumni organization if there's a credit union you can sign up with. To find a credit union near you, go to creditunion.coop or call (800) 358-5710.

2) Prepaid credit cards

If you’re having trouble qualifying for a credit card, you may consider opting for a prepaid credit card. Basically you deposit money onto this card and use it until the money runs out. There are no bills and no interest charges. But there are some things you should be aware of.

First, there are a lot of fees associated with prepaid cards including activation fees, transaction fees and fees when you put money on your card. In addition, these prepaid cards aren’t covered by the federal statutes that protect credit-card holders from fraud or limit their losses when cards are lost or stolen, says Curtis Arnold of Cardratings.com.

But some companies will offer some fraud protection. These cards may be a good option for younger people who are just getting introduced to the world of revolving credit since it’s a safer option than a secured card.

3) Secured credit cards

Secured credit cards operate just like regular credit cards except they are secured by a deposit held by the issuing bank. In general you have to have $500 to $1000 to get one of these secured cards. And your credit limit generally depends on the amount of your deposit. You will have to make interest payments if you don't pay in full. But if you want to improve your credit, using a secured credit card wisely can help you do that.

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