Features & Benefits of Credit, Debit & Prepaid Cards

Credit cards

Responsible spending and money control is easy with prepaid, reloadable cards.

The idea behind credit and debit cards is simple: replace the need to carry around your cash with a smaller, more secure, and more convenient piece of plastic. It seems simple enough, right? If that’s the case, then why does it have to be so complicated when it comes down to choosing one?

 

With so many different fees, rates, and rewards programs to choose from, it’s no wonder people are confused when it comes time to decide which is right for them. To help you better understand the benefits and drawbacks of each card, we’ve highlighted their features and compared their usability below:

 

Debit Cards

 

Debit cards (also known as bank or check cards) are payment cards that provide the cardholder electronic access to their bank account(s). Unlike credit cards, payments from a debit card are immediately transferred from the cardholder’s bank account, rather than requiring the money to be paid back at a later date. In addition, debit card transactions are often secured with a personal identification number (PIN). Debit cardholders usually have instant access to their bank account via withdrawal from an ATM as well. While some debit cards are eligible for certain rewards programs, they’re also prone to usage fees—both largely dependent on the cardholder’s bank’s policies.

 

Credit Cards

 

Credit cards are payment cards in which the issuer of the card (i.e., a bank) grants a line of credit to the consumer from which they can instantly borrow money for payments based on their promises to pay it back. Because the access to money isn’t limited to the value of a bank account, credit cardholders can continue a balance of debt. At the end of each billing cycle, cardholders have the option to pay back what they’ve borrowed in full, or pay a minimum payment defined by the issuer; what’s not paid back is subject to accruing interest. Typically at rates much higher than other forms of debt. Like debit cards, most credit cards have various rewards programs in place; however, the rates and fees associated with credit cards are much higher.

 

Prepaid Cards

 

There are two types of prepaid cards: reloadable and non-reloadable. Non-reloadable cards (i.e., Visa Gift) come with a predetermined amount up to $500 and can be used only until that amount runs out. Reloadable cards (i.e. Visa Prepaid) are sold with a predetermined amount, but can be reloaded with any amount of cash at any time. Once the balance of either card reaches $0.00 it will be rejected.

 

Non-Reloadable Cards

 

-  Can be purchased at grocery stores, retail stores, etc., and used wherever credit/debit cards are accepted (although some cards are valid only for use in the United States)

-  Can be issued to minors (age 13 and above) since no actual credit line is involved

-  No bank account or credit history required

-  Cards aren’t personalized or protected by a PIN (exception for those with an EMV chip)

-  CAN’T be used to get cash at an ATM

-  Can be used for online payments, but NOT recurring bills

-  Subject to an “activation fee”

 

Reloadable Cards

 

-  Can be purchased at grocery stores, retail stores, etc., and can be reloaded at specific locations determined by the card issuer

-  Accepted wherever credit/debit cards are accepted (international use varies from card to card)

-  Can be used for direct deposit of your wages, tax refunds, social security, etc.

-  Can be issued to anyone 18 and older with a valid government I.D.

-  No bank account or credit history required

-  Cards can be personalized and are protected by a PINCAN be used to get cash at an ATM

-  Can be used for online payments, including recurring bills

-  Fees vary from card to card, but cardholders are usually charged a small fee every time they reload their balance (among other fees)

 

Debit

Credit

Prepaid/
Non-Reloadable

Prepaid/
Reloadable

Bank Account/
Credit history required

Y

Y

N

N

Age Restriction (18+)

Y

Y

N

Y

“Reloadable” Account?

Y

N

N

Y

Monthly Payments

N

Y

N

N

Fees

Y

Y

Y

Y

Rewards Program

Y

Y

N

Y

Online Use

Y

Y

Y

Y

ATM Withdrawal

Y

N

N

Y

Personalization/PIN protection

Y

Y

N

Y

Ability to Overdraw?

Y

N/A

N

N

 

As you can see, prepaid cards often have fewer features than regular debit/credit cards (especially non-reloadable cards). However, their ability to be used by virtually anyone makes them an attractive option for those without bank accounts or poor credit history. They also make great money management tools for those learning how to manage their own finances.

 

For more information about the various types of payment cards, please visit your local FNB or go online to www.fnbfoxvalley.com