Prepaid Card vs Credit Card

Prepaid card

The money on prepaid cards is your own money. Prepaid cards look like credit cards but there is no credit on it. When you use prepaid cards you are spending your own money similar to a debit card.

To use a prepaid card you may not require a bank account. You have to load money into the prepaid card and use the card for purchases. Once the balance on your card decreases, you can add money to your card based on your requirements. 

These prepaid cards are also issued by major card networks like MasterCard, Visa, Discover and American Express. Prepaid cards are used where merchants accept network payments and you can buy groceries, pay online bills and other expenses. Usually, the Merchant fee for prepaid cards is less than credit cards. There may be some vendors who do not accept credit cards but accept prepaid cards.

Prepaid cards can work as an alternative to banks because prepaid cards have a routing number and an account number through which you can have your paycheck directly deposited to your prepaid card.

Check Here: Know all about Prepaid Cards

Prepaid cards are originated for customers who prefer to pay from their prepaid balance instead of credit.  It will help people who can’t access credit due to no credit history or poor credit score. It is best suited for those with credit issues. With a prepaid card you can spend only to an extent, the money that you have added in your card. It is also well suited to give the card to your children for any purchase.

Credit bureaus do not track the spending made on prepaid cards. Amount you have spent using your prepaid card will not count on building your credit score.

There are different types of prepaid cards such as reloadable prepaid cards without fees, unlimited prepaid cards, free prepaid debit cards. It is advised to contact the card issuer and understand the terms and conditions and apply for a card suitable according to your needs.

Pros and Cons of Prepaid Card

Prepaid card is not linked to your debit card, nor is it linked to any bank account.  You can spend what you loaded and it stops you from spending more than your limit.


  • You cannot spend more money than what you load on your prepaid card.
  • You can monitor what you have spent and track all your transactions on your prepaid card.
  • You can enjoy purchase benefits using prepaid cards.
  • Prepaid cards eliminate the risk of fraud as a bank account is not linked to your card.
  • It is safe and easy to use.


  • If the balance of your prepaid card is exhausted then you cannot purchase anything using the card.
  • Most of the prepaid cards cannot be used at an ATM.
  • Prepaid cards have an expiry date. If you do not use your card within the time limit you might lose the amount leftover on your card.

Credit card

Credit card allows you to make purchases using your credit limit issued by the bank. Credit limit depends on the credit score and other factors like income. Credit cards provide security, long term payment options and other robust features. 

You can spend your credit card up to a limit offered by the credit card issuer and you will be given a certain time to repay the amount. If you are unable to pay the amount spent, you have an option of paying the minimum balance. 

Check Here: Know about the working of a Credit Card

  • Remember, regularly paying only minimum balance can affect your credit score.
  • You should not spend your entire credit limit in one month nor in one purchase.
  • While you are using a credit card, make only affordable purchases.
  • Effective utilization of credit cards will have long term benefits.

To use effectively, always remember the rule of thumb “spend only up to 30% of your credit limit” and pay the credit card bill in full every month. 

A credit card is a very good resource to build your credit score. A good credit score shows that you are a truly worthy borrower. The credit card issuers will report your regular repayment of credit card bills to the credit bureaus. Credit bureaus keep a track of your payments and build the credit score accordingly.

The rewards and offers provided on a prepaid card are not as attractive as on a credit card. Credit cards offer discounts and perks on hotel bookings, dining, airport lounge access and various other benefits.

For every purchase you make you can collect reward points on your credit cards. You can redeem your points to purchase exciting products from the rewards catalogue.

You can use more than one credit card to enjoy the benefits of rewards and discounts. For different types of spending choose the best  credit card option that works according to your lifestyle and spending habits.

Pros and cons of Credit Card


  • Credit card provides the facility of making the payments over a period of time.
  • It facilitates the ability to earn reward points.
  • Some credit card lenders provide 0% interest on purchases and balance transfer facilities.
  • Credit cards provide disputable billing errors. It means you can put a hold on payment for billing errors. 
  • A credit card is a good source in times of emergencies.


  • It reduces your future income as credit card money is a borrowed money payable in future.
  • Credit card interest rate and fees are high. If you miss your payment, compounding interest is increasingly high.
  • The more you use a credit card the more you create debt.

Bottom line

Depending upon the lifestyle and spending needs it is up to an individual to decide which card to select either a prepaid card or credit card. Prepaid Card and Credit Card both are simple to use and have their own benefits. 

To find out more information about credit cards and the application process visit the Credit Card section on our website.

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Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.

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