An Alternative To Credit Cards
When shopping online, using a credit card has its downsides. We take a look how these compare with debit cards and the relatively new prepaid cards.
For online purchases, do you reach out for your goods past the Sword of Damocles as it's suspended by a thread, or do you lower yourself to them in a cage with a large feeding window, whilst a shark circles?Let me put it another way. Do you use a debit card, with its limited protection against mis-selling, and against suppliers going bust between payment and receipt of goods? If you shop a lot, and indiscriminately, online, you could argue it's only a matter of time before the sword falls. Or do you use a credit card for its safeguards, but with the possibility that you get bitten by interest when you fail to repay the balance on time?Another option is the relatively new idea of a prepaid card. You put money on it in the same way you top up prepaid mobile phones. You can't go overdrawn or get into debt, which limits your exposure to fraudsters. However, just like debit cards, you don't get the protection against suppliers that you get with credit cards.Still, it might appeal to people who can't get credit, such as children (via their parents!) and people with poor credit scores. Plus you can use it on the high street as well. The cards are topped up at thousands of retailers and even the Post Office. It's also great for budgeting and for people who have a habit of accidentally going overdrawn.Charges for these cards vary. The SNAP card claims that it doesn't charge you at all, except for a 'nominal' administration fee for taking money off the card again. On the other hand, a Cashplus prepaid card charges a £10 issue fee and a £5 monthly fee. There are other charges, too, including a £10 cancellation charge and a £2 charge for withdrawing cash from an ATM. (Yes, you can do that too.)But if you're good at paying off your balances on time, a cashback credit card will still be more suitable for you. The Morgan Stanley Platinum card offers 2% cashback on purchases until the 1st of September, when it goes down to 'up to 1%'. To avoid paying a load of interest (typcally 15.9% a year), you must pay off the balance within 55 days.The MBNA Platinum Rewards card offers 1% cashback. You must pay off your purchases within 56 days to avoid interest (also typically 15.9%). Or you may prefer the American Express Nectar card. This gives you four Nectar points for every £1 spent in Nectar sponsors, and one point for each £1 spent elsewhere. You have to repay the balance in full within 25 days of the statement date to avoid paying interest (typically at 12.9%).Prepaid cards are good for people who lack discipline. Otherwise, I think you're better off with a credit card!Don't use the credit cards in this article for balance transfers or for purchases that take a while to repay. Compare credit cards here.