What’s the difference between a prepaid card and a debit or credit card?
Prepaid cards are not linked to a bank account, and you aren’t borrowing money or paying a deposit that acts as collateral, you only have what is on the card.
What’s the difference between a prepaid card and a debit or credit card?
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A prepaid card, debit card, and credit card all serve different functions in managing and spending money.
Prepaid Card: This type of card is loaded with a certain amount of money in advance. You can only spend the amount that you have preloaded onto the card. It’s not linked to a bank account, and there’s no credit involved; once the balance is depleted, you cannot use it until you reload it.
Debit Card: A debit card is linked directly to your bank account. When you make a purchase, the money is taken directly from your account. You can only spend what you have in your account, helping to avoid debt.
Credit Card: A credit card allows you to borrow money up to a certain limit to make purchases. You’re expected to pay this money back, often with interest if not paid in full by the due date. This effectively lets you spend beyond what you currently own.
In summary, the main difference is that prepaid cards require you to load money onto the card in advance, debit cards draw straight from your bank account, and credit cards allow you to borrow money with the obligation to pay it back later.