Difference between prepaid cards and gift cards

3 Major Difference between Prepaid Cards and Gift Cards

Prepaid cards and gift cards are both types of plastic cards which can be used to make purchases. They deliver popular presents as well: A dynamic way to give a recipient the funds to buy whatever they like that seems safer and a touch classier than cash, and more comfortable than a traditional personal check. The biggest difference between the two reflects their permanence: prepaid cards can be reloaded and used indefinitely, while gift cards can generally only be used until the dollar amount on them is used up.

Prepaid cards and gift cards: Highlights

  • Both prepaid cards and gift cards are loaded with a fixed amount of money.
  • Prepaid cards are a type of debit card issued by a bank or credit card company, can be used to make purchases, pay bills, or get cash from ATMs.
  • Gift cards are mainly for use at a particular retailer, though some credit card companies issue them too; they traditionally can only be used to buy items.
  • Unlike most gift cards, prepaid cards can be used indefinitely, as long as money is continually added to the card. This is not the case with the gift cards. You can use gift cards only till the amount in that gift card is not exhausted. After that , gift cards cant be reloaded

What is a Prepaid Card?

Prepaid cards are technically a type of debit card. Prepaid cards  are Issued by a financial institution or credit card company—Visa, MasterCard, and Discover all offer them—they are deposited or “loaded” with a certain amount of money. They then can be used in person or online to purchase items or pay bills. They can also be used at ATMs to withdraw cash.

Similar to credit cards, prepaid credit cards have a number and an expiration date printed on the front or back, and they generally can be used in the same places. The amount of money deposited or “loaded” onto the card represents the card’s credit limit—that is, how much can be charged on it. Once the balance on the card had been exhausted, the card is worthless, till more funds are deposited on it. In fact, a prepaid debit card can be used repeatedly, so long as the cardholder keeps adding money to the card. It might carry a monthly fee

What is prepaid credit card

These prepaid cards are not the same as prepaid credit cards. Requiring an application, a credit check, and approval from the issuer, a prepaid credit card functions like a regular credit card (the cardholder can maintain an outstanding balance, receives monthly statements ).The key difference is that approval for the prepaid credit card is DEPENDENT on a security deposit—collateral for the issuer, in case the cardholder falls delinquent in their payments.

Prepaid cards are technically prepaid debit cards: When used in a transaction, the money on them is subtracted right away, and not put on a balance to be paid later.

What is a Gift Card?

A gift card is a type of stored value card loaded with funds for future use. Only it contains a specific amount of money. Once this sum is spent down, the card can no longer be used. Gift cards also have expiration dates, which are often much shorter than that of prepaid cards.

Gift cards can be purchased in several different formats. The most common type is what’s technically known as a closed loop card: It is used only at a particular merchant or certain retailer say amazon,walmart,etc and bears that outfit’s name and logo. Some retail groups will allow the same gift card to be used at any of their affiliated stores.

Gift cards began with specific stores.These days many of the major charge or credit card issuers, like American Express, Visa, Discover, and MasterCard, are also offer gift cards, good anywhere the regular plastic is accepted. Known as open-loop cards, these are most easily confused with prepaid debit cards, especially since some of them are reloadable as well. These cards may carry a one-time activation fee.

Prepaid vs. Gift Cards
FeaturesPrepaid Debit CardRetail Gift Card
Network Branded (Visa/Mastercard)YesNo
Monthly FeesUsuallyNo
Accepted at most merchantsYesNo
Comes in Pre-set denominationsNoYes
ReloadableYesNo