How Prepaid Cards Are Different From Credit Cards?
A credit card is very common nowadays, therefore almost everyone is familiar with its uses and how it works. But a prepaid card is something we don’t often hear so although it is easy to confuse both, prepaid cards and credit cards can’t be any more different. Unlike how credit cards work, prepaid cards do not involve any credit.
Credit Card Vs Prepaid Cards
Although prepaid cards are much like any other debit or credit card, they work in a very different way. A prepaid card is more like a gift card, which means you have to load money in them in advance and then you can use them for transactions. Prepaid cards are issued based on the funds you have deposited. Therefore, everybody is qualified, including individuals who have poor credit. No income proof or job confirmation is required, and acceptance is assured and quick.
Features of Prepaid Card:
- Since they provide the convenience of credit and debit cards with no need of requiring customers to establish an account with a banking entity, prepaid cards are well-liked by customers.
- When getting a prepaid card, you do not need to have a credit score.
- The ability to complete purchases through a prepaid card while not accruing any debt or paying interest down the road is among its main benefits.
- Another advantage of prepaid cards is that you may only spend as much as you put into them; therefore, if you tend to overspend, prepaid cards may prove to be quite helpful. With prepaid cards, you may manage your expenditures according to the amount you have loaded onto the card to avoid getting into unnecessary debt.
- Unlike credit cards prepaid cards let you withdraw money from ATMs without any hefty additional charges.
A credit card is a transaction card provided by a lender that enables its bearer to borrow funds up to a predetermined limit in addition to making transactions in-person or digitally. The expenditures could then be repaid over the period, including interest rates and repayment deadlines which must be followed.
Features of Credit Card:
- Credit cards are a very convenient form of financial tool. You can use credit cards to purchase the things you need without jolting your monthly budget or wallet.
- Credit cards offer various benefits to their users, like welcome benefits, rewards, cashback, travel perks, entertainment advantages, and many more.
- 3. Traveling internationally with a credit card is advantageous because you won’t need to bring cash because credit cards are accepted practically everywhere.
- Credit cards allow you to divide large transactions into manageable sums by offering EMI alternatives.
- A function on credit cards shields users from deception, such as theft and accidental property destruction. Many credit cards would even support customers if they wish to replace or want a refund for a damaged product.
|BASIS||PREPAID CARD||CREDIT CARD|
|Credit score||A credit score is not required when using a prepaid card.||A credit score is required.|
|Funds||You can use the funds you have pre-deposited onto the card.||You can use the funds (credit line) that the lender has provided.|
|Chances of overspending||No.||Yes.|
|Helps in building a credit score||As there is no credit involved, prepaid cards do not make or break your credit score.||Credit cards do play an important role in building your credit score.|
Prepaid cards and credit cards both offer distinct features and advantages to their customers. If you’re unsure about which will be ideal for you, determining your needs and requirements will undoubtedly be helpful.