New digital payment option provides credit card debt alternative

Dwolla, a startup company in Iowa, has been testing a smartphone payment option for businesses and consumers alike, which may soon be rolled out to a national audience, according to a report in the Des Moines Register. The program allows Americans to pay not only retailers without taking on credit card debt, but also send money to other users.

The program works by loading money into an account with a debit card, rather than dealing with credit card debt, the report said. And instead of charging a small percentage of the transaction's total cost like lenders do, Dwolla takes 25 cents, regardless of the price.

"Think of Dwolla as PayPal without the fees," company co-founder Ben Milne told the paper.

Many consumers have reduced their credit use considerably in the last year as the recession deepened and they became more conscious of the cost of credit card debt.