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What’s the Difference Between a Prepay Card and a Credit Card?

This can be among those questions that some shoppers may not be in a position to answer, even when they have got used both types of card. This will likely especially be true since the prepaid and bank cards may look very similar and are both simple to operate. Simply punch within your PIN number when you need to make a withdrawal or purchase.

However, using a prepay card you should only spend the bucks which you have preloaded about the card. So you cannot amass debt. Using a bank card, any time you invest in it, you’re borrowing money, which, unless you repay back when your monthly statement arrives, you may be charged interest on.

Where can the cards be utilized?

Both types of cards may bear a product (eg the MasterCard symbol), that might mean that they may be widely accepted wherever the brand is displayed. Indeed, both forms of plastic may typically be familiar with:

withdraw cash from an ATM in england;
withdraw cash from an ATM overseas;
purchase goods and services on the web and on the phone;
go shopping in stores, restaurants, garages etc; and
spend on bills.
What are another differences?

Thus far, they may seem similar. One of the main differences, then, might be in who can have a credit card or prepaid card, and the way much every one may cost you.

The central difference this is that, as discussed above, bank cards are fashions of borrowing money from your bank or card provider. Prepaid cards conversely only involve income that you just yourself have loaded on top of the card. There is no borrowing included in a prepaid card.

Hence the attitudes in the credit card issuers may be different. Being a prepaid credit card user, you’re merely income that you have already placed on upfront. Being a user of a credit card, you happen to be spending cash which you have not really paid the charge card company. Accordingly this presents a risk for the card issuer that you may be unable to pay back the money.

Obtaining cards

Since there isn’t any risk involved into a prepaid credit card issuer (since you are not borrowing money from their store), there is typically no credit assessment to pass so that you can be eligible for one. Conversely, non prepaid credit card providers may insist which you pass a credit check with flying colours so that they can incorporate some confidence that you are likely to end up able to afford the sum which you have borrowed.

Charging methods

Finally, another fundamental contrast between both varieties of card may be the procedure by which you may well be charged for using them. Users of pre-pay credit cards may typically end up paying fees for performing particular activities, like topping up and making withdrawals. With prepaid cards such charges are transparent.

With charge cards however, the eye that’s charged may continue for many months (and maybe even years) if you have not been able to repay it quickly, making the purchases that you’ve made with them potentially very expensive indeed!

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