One of the questions we get a lot is what is the different between a prepaid credit card and a prepaid gift card. While these cards are similar, there are also big differences between the two. The primary difference is that a prepaid credit card is reloadable, while a gift card typically is not. But there can be other differences as well, so below we’ll walk through what each type of prepaid card offers, and when it’s better to use one type of card versus the other.
Prepaid Credit Cards
There are many great reasons to use a prepaid card. A prepaid card is a reloadable card that you deposit funds onto. It works similar to a credit card, but it will not affect your credit in anyway. As a matter of fact, you can have bad credit or no credit and still obtain a prepaid card. The card is not a line of credit, but instead it requires you to make a deposit onto the card before you can use it. The amount you have to spend is the amount you deposit. Once you spend the money you have put on the card you can’t use the card until you load more money onto it. Each prepaid card has different options for loading money to the card, but just about all prepaid cards offer to load from a store location or direct deposit. Some prepaid cards even help the user build credit and offer rewards. Prepaid cards are a safe and convenient alternative to using a credit card.
Prepaid Benefits
- Everyone is eligible
- Great tool for budgeting
- Used anywhere Visa and MasterCard debit can be used
- Low fees
Gift Cards
A Gift Card is a card that has a fixed amount loaded onto the card by the card purchaser. Once the money has been spent the card is no longer usable and the card can’t be reloaded. Often when you purchase a gift card it has an expiration date on the card. If the card is not used before it expires you lose out on using the card. Store gift cards are extremely popular and are a great gift giving idea. You can also purchase Visa and MasterCard gift cards which look very similar to prepaid cards, but work very differently. In recent years gift cards have replaced gift certificates. They are basically the same thing, except gift cards are easier to redeem and easier to replace if lost. Now there are places where you can even design your own gift. The cards can be used to pay bills, make ATM withdraws, and pay at the pump. Gift cards have been affected by some of the rules and regulations as a result of the credit card act.
Gift Card Benefits
- Great gift idea
- Can be store gift cards or Visa/ MasterCard
- In most cases they can be replace if lost or stolen
- Online account access