The difference between prepaid, debit and credit cards

07 March 2022
With so many cards to choose from, you may be wondering which one is best for you. Understanding the differences between prepaid, debit and credit cards can help you make the right decision for your lifestyle.

When it comes to cards, it’s important to note that prepaid, debit and credit cards are not the same thing. If you’re not using cash, you’re likely using one of them to make your purchases, but they work in different ways. Let's explore: 

What is a prepaid card?

Sometimes at supermarkets, you'll see a variety of gift cards and prepaid cards for purchase. Like a gift card, prepaid cards work by adding value to the card before you can use it. Prepaid cards are typically not linked to a traditional bank account, but in special cases (with digital banks like Cashee) they can. Instead, you are spending money you've added to the prepaid card account in advance. You cannot spend more than what is in your account.

What is a debit card?

Debit cards are the most commonly used cards. When you open an account at a bank, you usually get a debit card linked to your account. A debit card allows you to spend money from your bank account whenever you need as long as you have money in the account. You can put money into your account by depositing cash or making a transfer from your internet banking platform or mobile banking app.

What is a credit card?

Credit cards allow you to borrow money from the card issuer up to a certain limit to purchase items or withdraw cash. However, using a credit card requires that you pay back the amount spent. When using a credit card, you must pay at least the minimum payment amount to the credit provider every month by the due date. 

Which one is best? 

Credit cards have their benefits but can become a debt risk. It is always recommended to get plenty of advice from your parents and bank before getting a credit card.

Debit cards are ideal if you want easy access to your money and have to make payments often. On the other hand, prepaid cards are useful if you want to stick to a strict budget and only want to spend a limited amount. It can be a great option if you are new to banking and cards and want to learn with low risk.

Finding the right card for you 

While they all typically have a network logo such as MasterCard or Visa displayed, prepaid, debit and credit cards are very different. It is important to keep your lifestyle and purchasing habits in mind before choosing to get a specific card. 

Most teenagers start with a prepaid card that can be loaded with weekly or monthly allowances. This enables you to spend only what you have available. A prepaid card is also a great way to learn how to spend within a budget. As you become more confident with using a card, your parents, older sibling, or local bank can help you to open a bank account and get a debit card. 

Whichever one you choose, remember that bank cards come with great responsibility, so always keep track of your spending and buy wisely!