Prepaid Cards vs. Gift Cards

2 mn read

Prepaid cards and gift cards resemble plastic bank credit cards and can be used to make in-store or online purchases.

They are also popularly used as gifts and serve as a versatile way to give recipients funds to buy whatever they like that is safer than cash and more convenient than a personal cheque.

They make popular presents as well: A versatile way to give a recipient the funds to buy whatever they like that seems safer and a touch classier than a wad of cash, and more convenient than a personal check.

The biggest difference between the two reflects their permanence: prepaid cards can be reloaded and used indefinitely, while gift cards can generally only be used until the amount on them is exhausted.

Both prepaid cards and gift cards are loaded with a set amount of money.

Prepaid cards, a type of debit card issued by a bank or credit card company, can be used to make purchases, pay bills, or get cash from ATMs.

Gift cards are mainly for use at a particular retailer, though some credit card companies issue them too; they traditionally can only be used to buy items.

Unlike most gift cards, prepaid cards can be used indefinitely, as long as money is continually added to the card.

Prepaid cards are technically prepaid debit cards: When used in a transaction, the money on them is subtracted right away, and not put on a balance to be paid later.

Gift cards began with specific stores. Now, however, many of the major charge or credit card issuers, like American Express, Visa, Discover, and MasterCard, are also offering gift cards, good anywhere the regular plastic is accepted.

Known as open-loop cards, these are most easily confused with prepaid debit cards, especially since some of them are reloadable as well.

These cards may carry a one-time activation fee.

In our next article, we would be talking about the better gift between Prepaid Cards and Gift Cards.


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