The New Alternatives to Credit Cards Explained
The number of people in Australia with credit cards is falling, and plenty of new alternatives are taking their place.
Having a credit card has long been seen as a rite of passage, a grown-up thing to do, and a signal that financial institutions believe you’re a trustworthy and valued part of the economy.
The new tech-savvy generations living without credit cards
That is, of course, a slightly out-of-date way of looking at credit cards, with plenty of people these days forgoing the need to sign up for one, just as they avoid having other things in their wallets, like a video club membership card, or cash.
The fact is, the modern world offers plenty of other ways to pay, to shop, either online or physically, and to transfer money to your friends, family or colleagues. It no longer even seems entirely strange to see the person in front of you at the bar paying for a round of drinks by tapping their smart watch – or even their Fitbit – on a screen. Although it can be amusing to watch if they don’t put those drinks down first – that wrist roll can be a killer. It makes you wonder whether the Fitbit is quietly noting how many drinks you’ve had, and adjusting your daily calorie-burn figures accordingly.
While some people just don’t want a credit card, because it’s not the way they choose to manage or consolidate debt, others might not be able to get one, because of a poor credit history.
Indeed, the number of active credit card accounts in Australia dropped in 2018, to 15.97 million, the lowest number since 2015.
In part, this is due to new credit card rules that came into force on January 1, that make it harder for people to get one, by forcing applicants to accept a credit limit they can prove they’re capable of paying off within three years. The number of people who operate multiple credit cards is also expected to fall as a result.
Fortunately, there are many new alternatives to credit cards – buy now pay later such as LatitudePay or international travel cards. If this all sounds new to you, fear not, we're here to help.
Debit cards – like credit cards, but without repayments...or credit
If you’re completely confident of being able to live within your means and only spend money that you’ve actually got, then Debit Cards are for you. They generally come with any savings account as a matter of course, and also allow you access to your cash through ATMs and point of sale. They’ve long been an option for those who eschew the use of credit and are the safe option for most people.
The problem, of course, is that you can’t just snap something up that costs slightly more than you’ve got in your account and then pay it off later – as a credit card allows you to. But that does still leave you with other options…
Personal Loans – an alternative form of credit
If you’re worried about the levels of interest that some credit card companies charge, and you want total clarity for budgeting purposes on how much money you’re going to have to spend, or repay, each month, you can always just go for a personal loan.
Through a finance provider, you can apply for a personal loan, for those slightly bigger-ticket items, even for amounts as low as $3,000, and pay as little as 9.99% p.a. interest (for a secured personal loan), which is a lot cheaper than some credit cards are going to charge.
Travelling the world, without paying international transaction fees
One very popular reason for getting a credit card is to make your life easier when travelling overseas. But, how many times have you casually swiped your way through Europe, only to return home to find a disturbing statement in your inbox, filled with international-transaction fees, and currency-conversion charges? And HOW much was that single stein of beer in Germany?
It might not be able to help you with the cost of beer, but a really clever travelling card – like Latitude’s 28° Global Platinum Mastercard – can be a much better, and cheaper, option.
This Latitude card allows you to hit the shops with no annual fee and no international transaction or currency-conversion fees on purchases when travelling. It comes with up to 55 interest-free days on purchases (if you pay your statement in full each month), too, so you won’t have to worry about paying for that rug you got talked into at the Istanbul bazaar, until you get home.
You can also hook up your card to your preferred mobile or wearable tech – including Apple Pay, Samsung Pay, Fitbit Pay, Google Pay and Garmin Pay. If you’re worried about carrying cash, or finding the right currency in tricky places like Croatia (which don’t use the Euro even though they’re part of the EU), you won’t have to with your modern tech.
Buy now, pay later
The idea of buy now and pay later is a little like an updated version of what older folk would know as “lay buying”. The difference being that in the old days, a shop would put your item aside, let you pay for it over several weeks, and then you got to take it home.
This new form of purchasing, such as Australia's newest provider, LatitudePay, allows you to take your purchase now, and pay for it later.
Basically, with these services, the price you’ve agreed to is split into ten weekly payments. As long as you make the next payment on time, you’ll pay no interest and no additional fees, with the only extra cost to you, happening if you’re late with your scheduled payments.
It’s no wonder this has such huge appeal to Generation Now!
Shoppers can apply online, while shopping the vast swathes of the internet and get instant approval within seconds.
It really does seem like a win-win, and one made for the instant-gratification, life-moves-at-iPhone speed generation, weaned on the idea of everything in the world being available, on Google, in less than a second.