Are you wondering what the difference between a traditional credit card and a regular prepaid card is?
With a credit card, you can make a purchase now and pay for it later, usually with interest. Alternatively, with a prepaid card, you can only spend the money that you’ve already loaded onto the card.
Prepaid cards can be useful for those who are low on funds or who have a low credit score; some even allow you to load them with foreign currency for use in international transactions.
A prepaid card is not connected to any kind of bank account or credit union share draft account. Instead, you’re using funds that you loaded onto the prepaid card in advance. Putting funds onto a card is another term for this action.
Prepaid cards typically prevent you from spending more than you have on the card. If you have joined your bank’s overdraft program, overspending is possible with your checking account and your debit card. If you try to make a purchase or withdraw money from an ATM and the amount is greater than the funds available in your account, your bank may assess you a fee. An overdraft fee will be assessed by your bank, and its repayment is mandatory.
As opposed to credit cards, prepaid cards have many distinct advantages. The two types of cards may share the same card network logo, making it difficult to tell them apart.
Credit card money is a form of borrowing. Most of the time, when you use a prepaid card, you are actually spending money that you have previously loaded onto the card.
Any prepaid card issuer that also grants you access to credit must follow the same regulations as traditional credit card issuers.