Here are the differences between prepaid cards, debit cards and credit cards. Prepaid cards are actually the variation of a debit card. All three are part of a payment network, mostly Visa, MasterCard or American Express. Because of this, these cards are accepted where the networks are accepted.

Prepaid Cards

As the name indicates, with prepaid cards, you have to make a deposit or recharge before using it. In other words, if your card doesn’t have enough balance to cover a purchase, then your transaction will be rejected. Anyone can purchase these types of cards regardless of your credit history as they are issued by companies outside of the banking system. At the same time, they don’t help you build a credit history. This card should not be confused with a secured credit card.

Read: Advantages and disadvantages of prepaid card

Debit Cards

With debit cards, the money comes out of your checking account when you make a transaction. If your account doesn’t have enough money, your transaction may be declined depending on the bank. If the transaction is approved, there may be overdraft fees.

Credit Cards

Finally, the credit card is nothing more than a loan that your bank has given you with the promise that you will pay it before a certain date. Although it has a limit on how much you can spend using the cards, you only pay interest on the amount you’ve used.

By knowing the differences, you’ll know what type of cards to use and for what purpose. You may have all three types of cards and use them for different reasons.