The Difference Between A Normal Credit Card And A Prepaid Credit Card

The world has changed drastically over the past decade. It has gone digital. No industry has experienced rapid growth like the finance industry. Consumers in the 21st century are more likely to use cards to make payments rather than to pay by cash. It is a trend that has proven beneficial for the global economy as both merchants and consumers have better access to digital solutions.

Barriers to financing have been eliminated with the introduction of mobile payment options, prepaid cards, credit cards, and debit cards. They have helped reduce transaction costs. Thus, the flow of goods and services has increased significantly. Until recently, credit cards had been leading the way. However, prepaid cards have changed the entire landscape. At surface level, the two share some similarities. Hence, it is common for people to confuse one for the other. But, when you dig a little deeper, you will notice that both digital payments solutions are entirely dissimilar.

Credit Cards

When you take a close look at credit card transactions, you will come to realize that they are basically loans. When a credit card is used for making a purchase, someone else’s money is used for that purchase. The consumer gets access to immediate financing from the credit card issuer and is able to buy the desired item. The consumer has to repay the debt at a later date.

The cardholder can either pay the loan in full or opt for a minimum payment plus interest plan once the credit card statement is received. Now, it is important to keep in mind that credit cards require one to meet the minimum financial threshold since they are a form of debt. Some of the requirements include an active bank account, reliable income, and a reasonable credit history.

These requirements make it difficult for many consumers to get a credit card and participate in the market. Although most credit card issuers claim to offer card options to everyone, it is far from the reality. It can be difficult for many consumers to join the formal banking system.

Are Prepaid Cards A Better Solution?

Prepaid cards have become incredibly popular in recent times. Even though consumers can use the Credit Card Karma, prepaid cards offer consumers with access to money. When you use the card, you would only spend money that you already have. The money would be electronically loaded into the card so that you can manage your account virtually.

Prepaid cardholders will be able to spend money as long as there is balance in their account. As soon as the balance becomes zero, you would need to load more funds into the card to use it again. There is no limit to who can get a prepaid card unlike a credit card which requires credit checks. Moreover, there are no overdraft fees or interest charges as they are not connected to your bank account.


There is no denying that prepaid cards are the future. They are changing the way we make a purchase. Thus, it is only a matter of time until they become common.


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