Difference between prepaid cards and debit cards

Prepaid cards and debit cards have both, differences and similarities. Both the cards can be owned by an individual regardless of his credit history. A prepaid card is issued by a financial institution that is preloaded with funds and is used like a normal credit card. It’s like a secured card which has money loaded into it. While a debit card is a card that is linked to your bank account and can be used anywhere like restaurants, shopping malls, hotels etc. The only condition is they must own a card swipe machine. People apply for a┬ádebit card from the bank itself. You can also use it at an ATM against a PIN given to you by the bank you have your account in. Both the cards have a card network logo like Visa, MasterCard, and American Express and are used to borrow money directly instead of borrowing funds. However, there are basic differences between a prepaid card and a debit card.

Major differences between prepaid cards and debit cards are as follows.

  • A debit card is linked to your checking account while a prepaid card is not linked to a checking account. In order to apply for a debit card, you need to have a bank account. A prepaid card requires only money to make a purchase or to reload the card.
  • Prepaid cards are funded by adding money to the card while debit cards are funded by the bank account to which they are attached.
  • Debit cards are usually free while prepaid cards generally have a monthly fee in order to keep the card active. You must always have enough money in the account to cover the fee each month.
  • Debit cards can be used at an ATM. Banks give you an ATM PIN when they give you a debit card, while no such case is there for prepaid cards.
  • Prepaid cards have fewer consumer protections than debit cards, such as those who apply for a new debit┬ácard if the card is lost, stolen, or other unauthorized charges appear.

Both the cards are useful and are easy and convenient for access to money without any hurdles. They both ensure that you don’t need to carry cash everywhere and make the people go toward a more cashless world.

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