Credit Card Alternatives for Millennials With Zero Credit
Possessing a credit card provides many advantages, such as the opportunity to pay for emergencies like an unexpected hospital bill or replacing a broken appliance. In 2017, Google Trends revealed that Filipino millennials searched for finance-related keywords (search growth of 24%), covering loans and credit cards.
Come 2019, credit card usage remains low in the country partly due to the strict requirements. If you’re not good at financial planning, it would be impossible to build a credit history to be approved for a credit card. In the same vein that you need to have money to make money, people need credit to build and improve their credit score.
Thanks to technological advancements and modernization in the digital age, the financial landscape has continued to evolve and become more inclusive. Today, there are many alternatives for people to build their credit and take advantage of services that echo the benefits of a credit card.
Millennials and Credit Cards in Numbers
In the U.S., there’s the Credit CARD Act of 2009 where credit card approval is banned for applicants under 21 years old unless they have proof that they have sufficient income to pay the bills or they have an adult co-signer.
Meanwhile, research from WalletHub showed that people aged 29 and younger are 93% more likely to have a negative perception of credit cards compared to people aged 59 and up.
In the Philippines, despite the number of banking facilities people can see left and right in towns, not all of them are inclusive. According to a VISA study, only 15% of Filipinos are credit-eligible.
Moreover, a 2017 survey on Financial Inclusion by BSP found that roughly 15.8 million Filipinos aged 15 years old and above have formal bank accounts—not even a quarter of the country’s whole adult population.
Out of the 77% unbanked Filipinos, 60% of them said one of the reasons is not having enough money while 18% said they don’t have the documentary requirements to open an account. Based on these numbers, chances are these people don’t qualify the steep requirements to acquire a credit card.
Credit cards allow individuals to purchase items priced beyond their current means, pay bills, or cover emergency purchases. However, the qualifications to avail a credit card are quite strict, making it non-inclusive especially to people who likely best benefit from its features.
Credit Card Alternatives for Those Without a Credit Score
One of the solutions that could address financial inclusivity is through modern credit card alternatives like the examples below. These substitutes extend financial opportunities and benefits to those who need it most.
Prepaid cards function like a debit card—you use them, you spend your own money, not the bank’s. These reloadable cards are designed for people with nonexistent or poor credit history, and a safe option for those with credit problems or recovering from debt.
Prepaid cards make it impossible to spend beyond your means or purchase items you otherwise couldn’t afford since the card serves you as long as it’s loaded with money. You can use it for online shopping or cashless payments, transfer money, and withdraw cash from accredited ATMs. When your balance runs low, you just need to top it up to use it.
Electronic wallets, also called digital wallets, refer to online services that enable people to make transactions electronically such as when using their smartphones. You can register information about your debit, prepaid, and credit cards here.
The Philippines, dubbed as the mobile money innovation hub, is one of the best examples of growing financial inclusion powered by technology. Thanks to its huge population and a highly active domestic remittance market, non-bank financial institutions continue to thrive and fill the gaps of traditional banking infrastructure.
Many popular digital wallets and mobile payment services now make it easier for individuals to shop online, pay bills, send and receive money, transfer funds from one bank to another, get credit, and more in-app. Think of it as a virtual credit card that offers more.
Opening an e-wallet account is also easy compared to credit cards. Nowadays, you only need to download an app, enter your mobile number and other information, and verify your account to unlock more features.
Cashback debit cards
For those who don’t want to apply or can’t apply for a credit card for different reasons, but want its cashback perk, here’s something that might delight you: cashback debit cards.
Debit cards that offer rewards are hard to come across but these credit card-like offers still exist in debit cards. With this, you can spend the money you already have and get rewarded for it. You can earn a percentage of cashback every time you purchase something. The amount is added to your account, which can be used for future transactions.
One upside to this offering is that individuals have no fear of getting in debt with every swipe or use of their card in pursuit of the rewards. In the U.S., several debit cards provide this perk like the Bank of America Visa Debit Card.
Thanks to its quick application and approval process, online loans make a great alternative for unbanked individuals. Online loans are accessible as long as you have a phone and an internet connection.
Individuals won’t need to put down collateral. They can apply for a loan in case of emergencies or financial shortcomings, such as paying bills, electronic or appliance replacement, or hospitalization. Moreover, the application is easy. Interested applicants only need one valid ID, proof of income and billing, and bank account details. Once approved, individuals will be able to receive the cash disbursement in as fast as 24 hours.
An example of a reliable online lender in the U.S. is Affirm. The financial service allows users to shop for items they need through their app or site. Then, they will state the total amount due upfront, which is fixed (no late fees or penalties). Users get to choose the payment schedule that best suits them, making repayments more manageable and keeping them out of debt.
Before, anyone who’d need immediate cash that doesn’t have a credit card would travel to the nearest pawnshop to turn that item into cash. Today, online pawning makes listing your items in exchange for a loan fast and hassle-free.
At PawnHero, individuals can get a loan in just a few steps. They would only need to submit photos and details of the item they want to give as security for appraisal, and then a pickup will be scheduled. Within the same day, they can receive the cash through their bank account or other payout methods. Once the user repays the loan, PawnHero will return the item.
Since the process is fast and simple, individuals who need instant cash can rely on online pawn shops in times of emergencies.
Break Financial Barriers with Modern Credit Card Alternatives
These modern alternatives to credit cards aim to serve people from all walks of life, but especially those who are unbanked and wish to participate in this sector. These inclusive and smart options allow more people to become more financially responsible. Additionally, alternatives like these can help individuals avoid the vicious credit card debt cycle.
In times of emergency, take advantage of these technological advancements to supplement your financial needs. Filipinos can depend on PawnHero, a credible online pawnshop in the Philippines, to cover for unexpected costs.
Are you in need of immediate cash? Try out our fast and convenient online pawn service today!