What is the difference between credit, debit, and prepaid card?
What is the difference between credit, debit, and prepaid card?
- Striga
- 6 min read
Table of Contents
Secured cards are mainly for making credit rather than for spending. Prepaid or debit cards are a good tool for budgeting and convenience, but it doesn’t affect your credit. Credit, debit, and prepaid cards have enough in common that they’re often confused. That confusion can result in cardholders mishandling their accounts and seeing their credit scores fall or seeing their scores stagnate when they wish them to grow.
What is a credit card?
A credit card is a payment card issued by a bank that allows the cardholder to borrow money, up to a specified amount, to complete purchases in stores or online. The purchases can then be paid off over time, with payment due dates that must be followed and interest charges that can accrue.
Spending with a credit card
The amount you’re entitled to spend on a credit card known as your credit limit is determined by factors including your credit score, payment record, and income. As long as you complete your minimum payments, the card issuer will allow you to spend up to your limit. That means if you have a EUR 5,000 limit on your credit card, you can spend up to EUR 5,000 on the card. However, you must pay interest on the unpaid balance left over after one billing cycle and the interest can be expensive.
What are the advantages of credit cards?
Credit cards are very distinct from debit cards or prepaid cards. Rather than having your bank transactions debited from your account, your bank pays the sum instantly and then offers you credit. On a monthly basis, you have to pay your invoice, at least in part. In different words, you wait until the end of the month before paying what you’ve already spent.
Thus, the money you spend is frankly loaned to you by your bank or the payment institution that issued the card.
Why credit cards are called "Credit Cards"?
This is why these cards are called credit cards. You also sign a credit contract when you apply for the card. You, along with the card-issuing institution, choose the top for your revolving credit. It’s advisable to choose a proper limit and one that brings your income into account. With a credit card, you can make payments and bank transactions, simply like with a debit card.
What is a debit card?
Prepaid cards are a safe cash option. You can use a prepaid card to buy items online and in stores. Prepaid cards are not connected to a checking account. Rather, you must load money onto the card before you can use it such as a gift card. Striga provides companies with the option to offer various prepaid cards for their end users.
Any cash you spend with a prepaid card is deducted from your card balance, not your balance. You can spend only the amount you load onto the card.
You don’t need an account to use prepaid cards, which is why they demand from people who are incapable to access traditional banking.
Linking cards to your wallet
Debit cards let you carry out transactions with the fiat currencies or crypto assets available in your wallet. Also, all your payments or withdrawals are debited directly from your balance. So there’s no risk of spending more money than you have. Striga helps you to issue your end-users Visa debit cards.
If you have this type of card, it’s advised that you regularly check changes in your balance so that nothing goes awry. That helps you survey your budget, which makes it easy to check in real-time in the app if you have sufficient money to go out so your payment isn’t declined.
What is a prepaid card?
Prepaid cards are a safe cash option. You can use a prepaid card to buy items online and in stores. Prepaid cards are not connected to a checking account. Rather, you must load money onto the card before you can use it such as a gift card. Striga provides companies with the option to offer various prepaid cards for their end users.
Any cash you spend with a prepaid card is deducted from your card balance, not your balance. You can spend only the amount you load onto the card.
You don’t need an account to use prepaid cards, which is why they demand from people who are incapable to access traditional banking.
A new payment cards method
Prepaid cards let you spend money without having it linked to a balance.
On top of that, you can typically do all the regular banking transactions you can with an account: withdrawals, transfers, and card payments. You just have to load money on the card first. Once the money is spent, you can’t spend any more until you prepaid it.
Prepaid cards have limited services
The most significant drawback of most prepaid cards is that they usually set limits on withdrawals, loading, or even annual payments.
Closing Thoughts
credit, debit, and prepaid cards can both be used to make purchases, but the best choice for you relies on what you want to get out of the card.
Which card is best for you comes down to your financial situation, how you manage your money and which features you’ll profit from the most.
Each of these cards can be used in various ways and comes with its own unique benefits, so many people choose to have two, or all three, of these cards.
Striga Crypto-native Banking as a Service:
Your path to building and launching financial products
Join the financial businesses that use Striga’s cloud platform to delight their customers and launch their own products without the complexities that come when dealing with core banking solutions’ relationships, licensing, compliance and payments methods.
FR 
EN