When people are asked about the basic difference between different types of payment cards, it has been seen that most of them do not even have a very clear idea of their primary purposes. Basically, there are three major types of payment cards: credit cards, debit cards, and prepaid cards.
However, everything related to these cards is not as simple as it appears to be. The selection of an appropriate payment card is a tough decision as there are many options available to select from. These include credit cards, debit cards, and prepaid cards. Due to the similarities between the usage and cancellation policies of these cards, many people mix up their basic features too.
1. Availability of Credit As the name implies, co-branded prepaid cards allow cardholders to use the money that they already have in their respective bank accounts only. The banks grant no credit to customers, when these cards are used to make transactions. On the other hand, some debit card issuers do provide a credit option via the overdraft facility.
2. Credit Inspection For the issuance of a prepaid card to customers, usually no credit check is performed. However, prior to issuing a debit card, banks usually go through the credit score and rating of the customers to ensure that they are responsible enough to repay on time if they ever need a loan.
Interest Rate Since debit cards do issue credit, they also charge interest on your transactions, with zero interest-free periods. However, with co-branded prepaid cards, as no extra money can be borrowed, thus, no interest is charged on your purchases.
Access to Credit Many people prefer plastic money over cash because it provides them with extra credit, which is some extra money from bank as loan. However, all cards do not facilitate their customers with this exclusive option. Prepaid cards allow customers to avail and use that money that they own. On the other hand, debit cards provide an additional option of over draft, through which cardholders can borrow some money from the bank.
5. Compatibility with ATM When it comes to the usage of these cards at ATMs, debit cards provide their customers with the facility on a wide scale. On the other hand, only a few co-branded prepaid cards can be used at ATMs to withdraw money instantly.
ATM Services At the ATMs, a debit card can be used to withdraw money but a prepaid card can't be used in the same way. There are only a few prepaid cards that actually provide customers with ATM services.
Before opting for a payment card, it is recommended to keep these basic differences in mind to select the most suitable option as per your needs.
However, everything related to these cards is not as simple as it appears to be. The selection of an appropriate payment card is a tough decision as there are many options available to select from. These include credit cards, debit cards, and prepaid cards. Due to the similarities between the usage and cancellation policies of these cards, many people mix up their basic features too.
1. Availability of Credit As the name implies, co-branded prepaid cards allow cardholders to use the money that they already have in their respective bank accounts only. The banks grant no credit to customers, when these cards are used to make transactions. On the other hand, some debit card issuers do provide a credit option via the overdraft facility.
2. Credit Inspection For the issuance of a prepaid card to customers, usually no credit check is performed. However, prior to issuing a debit card, banks usually go through the credit score and rating of the customers to ensure that they are responsible enough to repay on time if they ever need a loan.
Interest Rate Since debit cards do issue credit, they also charge interest on your transactions, with zero interest-free periods. However, with co-branded prepaid cards, as no extra money can be borrowed, thus, no interest is charged on your purchases.
Access to Credit Many people prefer plastic money over cash because it provides them with extra credit, which is some extra money from bank as loan. However, all cards do not facilitate their customers with this exclusive option. Prepaid cards allow customers to avail and use that money that they own. On the other hand, debit cards provide an additional option of over draft, through which cardholders can borrow some money from the bank.
5. Compatibility with ATM When it comes to the usage of these cards at ATMs, debit cards provide their customers with the facility on a wide scale. On the other hand, only a few co-branded prepaid cards can be used at ATMs to withdraw money instantly.
ATM Services At the ATMs, a debit card can be used to withdraw money but a prepaid card can't be used in the same way. There are only a few prepaid cards that actually provide customers with ATM services.
Before opting for a payment card, it is recommended to keep these basic differences in mind to select the most suitable option as per your needs.
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