Although prepaid and debit cards perform in comparable ways, there are differences between the 2 and consumers ought to clearly understand the similarities and difference before choosing one over the other.
Earlier than we get to the differences, let’s look at the relatedities. Each cards can be used anywhere the issuer is accepted – whether or not Visa, American Categorical, Discover or MasterCard. Reload-able prepaids will also be used at ATMs to withdraw cash just like debit cards. Additionally, prepaid cards can be used to shop online and pay bills (so long as they’re registered), much like debit cards. Nonetheless, there are variations:
The primary main difference between a prepaid and a debit card is that debit cards are linked to a bank account and draw money from that bank account to cover any cost made utilizing the card. Prepaid cards have a pre-loaded amount and the user is able to make use of only the amount of money loaded on the card. Some prepaids are reload-able, which signifies that the user can add more money to the card after the initial quantity is depleted, while others are for one time use only, that means that once the worth on the card is exhausted, the card is useless.
Another distinction between the two is the issue of protection. Debit card; because they are linked to bank accounts do have some protection towards fraudulent purchases. Most banks will refund money to a checking or financial savings account if the card was used fraudulently. While some prepaids provide this protection, it varies by issuer and mostly applies to reloadable prepaid cards.
The opposite difference between a debit and prepaid card is the possibility of overdraft. While virtually all prepaid cards are limited to the sum of money loaded on them, and therefore nearly eliminates the risk of overdraft, debit cards may be overdrawn, leading to fees that can add up quickly. In some cases, banks will cost a number of overdraft fees on overdrawn transactions occurring the same day. You subsequently must keep an eye on your account to keep away from getting caught up in this situation.
Finally, there may be virtually a one hundred% assured approval for prepaid cards. Even with reloadable prepaids that require personal data like social security number and address, consumers are hardly ever denied so long as they provide the data requested. Nevertheless, not all applicants are approved for bank accounts, and hence not all candidates that apply for debit cards are able to get them. That makes the reloadable prepaid cards more attractive to the unbanked or those who are unable to qualify for bank accounts.
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