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Borrowing money can be tricky sometimes, especially if you’ve had problems with repayments in the past, meaning that your access to financial products is limited. This is just one of many reasons why a credit card might not necessarily be for you.

If you’re still keen on borrowing money, but not through a credit card, we’ve come up with a few alternatives you might want to consider instead.

Best alternatives to credit cards: a summary

  • Debit card
  • Overdraft
  • Personal loan
  • Secured loan
  • Short term loan
  • Guarantor loan
  • Basic current account
  • Peer to peer lending
  • PayPal

Debit card

Perhaps the most obvious alternative to a credit card is a debit card, which usually comes as standard with a current account. If you’re spending online, over the phone or in-store and don’t want to use cash, a debit card offers convenience and some consumer protection. However, it won’t allow you to spend money you don’t have, unless you have an arranged overdraft.

When you’re unhappy with goods purchased or have bought something that wasn’t as described, you may be able to get a refund too via Chargeback, which can provide extra peace of mind. This is a process whereby your bank reverses the transaction, though there is a time limit on when this can be performed and it isn’t necessarily a quick process.  

Read our guide for everything you need to know about current accounts here.

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When it comes to borrowing money, your bank often knows you best. So, if you need a little extra cash on a short-term basis, you could consider applying for an arranged overdraft, as part of your current account. This will allow you to withdraw money up to an agreed limit when your balance goes into negative figures.

Some bank accounts provide this facility interest-free up to a certain amount or for an agreed period, depending on individual circumstances. If you do choose to use an overdraft that you’ll be charged interest on, along with a plan of how you’ll clear the debt, you should be aware in advance how much it will cost you to borrow in this way.

It’s common for arranged overdraft interest rates to be fairly high, so although this can be a convenient way to borrow, it’s rarely the most cost-effective unless you have a 0% deal in place.  

Arranging an overdraft with your bank is not often thought of as an alternative to credit cards, but it might be all you need to help you navigate a sticky patch.

Personal Loan

Planning some home improvements or the holiday of a lifetime? Can’t access the best credit card deals with 0% periods or low-interest rates? It may actually work out cheaper for you to take out a personal loan if you can secure a more attractive interest rate.

Again, how much you can borrow and at what rate will depend on your circumstances. Along with knowing just how you’ll pay the loan back, and being confident that you can afford the repayments, you’ll need to look out for things like early repayment or late fees that have the potential to bump up the cost of your borrowing.

Fixed or variable rate loan?

Make sure you’re crystal clear on whether you are taking a fixed rate or variable rate product too as this could have a real impact on your ability to service the loan and budget for other things. If you're wondering "which personal loan is best for me?" you might want to start with checking your eligibility on moneymatcher, our free online comparison tool.

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Secured loan

An unsecured loan (such as personal loans mentioned above) will usually allow you to borrow more than a standard credit card, ideal for those who want to use the money to make a home improvement, buy a new car or even pay for a wedding.

If you want to take that a step further, a secured loan will often give you the option of borrowing more, as the amount is secured against an asset you own such as your home or your car. The downside is that a secured loan is a lot riskier, as failure to repay can result in your asset being repossessed.

Short-term loan

If you have a particularly expensive month due to a broken boiler or your car breaking down, for example, you might find trying to afford regular bills a bit of a struggle. One option for those who have bad credit is to apply for a short-term loan, which should provide enough to cover the unforeseen expense so you can carry on as normal.

Whilst this is a good way of covering a one-off expense, taking out multiple short-term loans can be a recipe for disaster, given that they have such high interest rates. It might be ideal as an alternative to a credit card, but always ensure you can pay it off completely otherwise you’ll be faced with even more debt as a result.

Guarantor loan

Another option if you have a particularly bad credit rating or no credit rating at all, is to get a guarantor loan instead. This takes the good credit rating from a willing family member or friend, and allows them to act as a guarantor on your behalf. This is not only a good option if you have a bad credit rating but also if you are a young person who hasn’t had a chance to build up a decent credit score.

Whilst this is a good alternative to a credit card, it does make your guarantor ultimately responsible for the loan. This means that if you miss any payments or fail to repay the loan on time, your guarantor will be liable to pay it instead. If your guarantor happens to be your parent or a close friend, this can make things very tricky.

Basic current account

One option that will limit the possibility of increasing your debt is by using a basic current account. It is the same as a normal current account, but with less features to choose from meaning that there is less risk of you picking up anymore debt along the way.

While a standard current account can still charge you for going overdrawn, a basic current account doesn’t let you, which also means you won’t need to pass a credit check either. Particularly good for those with a bad credit rating.

Peer to peer lending

Peer to peer lending is growing as an alternative to credit cards. This type of borrowing is a form of personal loan but instead of borrowing from a bank or building society you lend from individuals who would like to make more money on their savings than traditional savings’ accounts offer. 

You’re matched with lenders through an online service that vets borrowers for suitability. This means you’ll still need to make an application and be risk assessed as you would for any other personal loan.

As with other loans, if you fail to make payments on time or default on the loan you could damage your credit score and be liable for additional charges and fees. It’s therefore critical you check out the terms and conditions as well as interest rates.


No longer reserved for making payments on online auction sites, PayPal can now be used to send money to friends and family, issue invoices for business and even pay for goods in shops and restaurants.

PayPal offers some consumer protection through its disputes’ resolution service. As it’s accepted by lots of online retailers, it’s pretty convenient too. Unfortunately, depending on what you are buying and where, you may not have the option to pay by PayPal, though the ability to use it in the majority of everyday transactions may not be far off. Even some bus companies now accept PayPal on their services!

Linking PayPal with a credit card

PayPal operates as another payment method – rather than a way of borrowing – unless you associate your PayPal account with a credit card or use PayPal’s own PayPal credit.

However, if you use a credit card from a different provider attached to your PayPal account, you won’t be protected under Section 75 of the Consumer Credit Act. This is because you’re conducting business through a third party.

What next?

Hopefully you will have found an alternative financial product to suit your requirements but if not, try using our moneymatcher for loans to see if you can find one to suit you. Alternatively, have a look through our current accounts tables to find out whether you can pick out a debit card or overdraft to suit your circumstances.