Debit Card vs. Prepaid Debit Card: All the Information You Need to Make the Right Choice

Thursday, June 21, 2018, 6:00 AM | Leave Comment

Banking services and fintech are spoiling us for choice. We have an option to choose from a plethora of credit cards, debit cards, travel credit cards, prepaid cards and more.

It is often difficult to make the right choice with so many options in front of us. Not every card is fit for all types of spenders.

Some people shop more from a particular chain of stores, some people buy indiscriminately from any store at any chance they get, and there are others, who spend the bare minimum each month on utilities only. There is possibly no way all these types of buyers could benefit from just one card type.

  • The two best card options that help you with personal finance management

    A debit card and a prepaid debit card are sound ways to manage your finances.

    Both these card types eliminate the possibility of spending more than your fiscal capacity. However, each of them does so in remarkable ways.

    Prepaid debit cards have a direct link to your bank account. There are a few kinds of transactions that can push the limit of a checking account debit card.

    Several times people want to eliminate even the slightest possibility of overspending.

    In such situations, a prepaid debit card is the best option. This kind of a debit card allows you to spend the money you have transferred to the card already. You already know how much money you have loaded and this sets an upper threshold of spending on a prepaid card.

    A prepaid card typically has a logo of MasterCard, Discover, American Express or Visa. That does not make them another credit card.

    Using a credit card means borrowing money or credit that you will have to pay off at the end of a billing cycle.

    Using a prepaid card is very different from using any other debit card or a credit card. They offer better control of your finances by eliminating the possibility of overcharging.

    Nonetheless, experts opine that these prepaid cards are not as secure as the favorite credit cards or debit cards. In case your card is lost or stolen, you might not be able to access similar levels of protection level as the latter.

  • The costs of maintenance: debit cards vs. prepaid debit cards

    Debit cards usually do not come with rental expenses or processing costs. Some banks do have service fees for their debit card services.

    However, if your card is from MasterCard or Visa, your bank will charge a monthly fee for the upkeep. Paying the fee does not involve any extra steps. You have to load enough money on the card to cover the charges.

    Additionally, you might have to pay extra, if you overdraw your bank account or if you don’t have overdraft protection. You can recharge your Visa or MasterCard every month by adding cash or via a check. Currently, banks do not support the recharge of a prepaid card through credit cards.

    However, you can surely buy specific gift cards and prepaid merchant cards with your credit cards. You must have already done so or seen people do it.

    There are many retailers around the US and several restaurant chains too, who allow people to pay for gift cards with credit cards.

  • What are the expiration dates and limitations of the different card types?

    Most debit cards come with a pre-designated expiry date. As long as you keep your checking account active, you can use the linked debit card, and you can renew it after the expiration.

    There is no such hassle with a prepaid credit card. You can reload cash value as many times as you want and for as long as you want after you exhaust the initial cash balance. Therefore, you can use a debit card or a prepaid debit card for as long as you want.

    When a prepaid card runs out of money, you will receive the notification along with a “declined transaction” message for new transactions if you do not recharge.

    Additionally, some co-branded prepaid cards come with an expiry date. In case you fail to spend the loaded amount within the expiration date, you run the risk of losing the money.

    On the other hand, a debit card has a spending limit that depends on your checking account balance. A few banks provide overdraft protection against a nominal fee.

Their ease of use, bonus offers, occasional rewards, and cash-backs make the different debit cards quite ideal for a variety of users. Nonetheless, if you want to draw the leash on your monthly costs or sporadic expenses, you should go with a prepaid debit card that sets an upper limit for your expenditures.

Since not all debit cards from every bank are equally user-friendly or beneficial, always ask around for user feedback from legitimate sources before you decide to use one.

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