When we start talking about plastic cards, we sometimes tend to lump debit, prepaid and credit cards together. That can be confusing if you’re trying to compare debit cards as each type is different to the others. By knowing the main differences between these three types of plastic, you may be better versed in choosing the card that is suitable for your needs.
The credit card
While they are all convenient to use – especially if making online purchases or over the telephone – debit, prepaid and credit cards are quite different.
A credit card typically brings with it what’s called a credit limit. That is effectively a form of on-tap loan that you can typically use at any time.
Useful as that may be, you may also run the risk of spending more than you intend to and drifting into potentially serious debt problems as a result. You’ll also typically need to meet certain earnings and credit-history criteria before you’ll be able to get this type of card.
The bank account debit card
A bank account may provide what’s called a debit card. This acts as a form of electronic cheque and when you use it, checks will typically be made to ensure that your bank account has the funds in it to pay for whatever it is you’re trying to purchase.
The bank account debit card typically gives the user full access to all funds that are contained in the account (and any pre-agreed overdraft). Some people may find this to be something of a security risk and of course, you’ll need a bank account to be able to get one of these cards.
The prepaid debit card
The prepaid card is identical to the bank debit card or to a credit card in terms of how it can be used on the High Street or online – except for the fact that it is not linked to your bank account, nor is it a form of credit.
You simply load money onto it, typically by using one of the many PayPoint outlets that you’ll see around or via bank transfer. Once the money is loaded, the card can be used in all normal plastic payment roles and you can spend up to the amount that you’ve loaded onto the card.
If you have a prepaid debit card you can’t spend more money at a given time than you have loaded onto it – helpful if you’re trying to control your spending.
You also typically don’t need a credit history check to get one, so it may be useful if you have been declined for a credit card or bank account previously.
So, if you are looking to compare debit cards, do note the key differences as described above. That way you can hopefully get the card that is most suitable for your circumstances.
