Differences Between Prepaid Cards And Gift Cards: Which Should You Choose?

There’s nothing to be shy about, my friend. A lot of us don’t know many things. If you were not sure about the differences between prepaid cards and gift cards before now, it’s not a big deal.

In this eye-opening article, we’ll discuss the key differences between prepaid and gift cards. Knowing the differences between the two cards will enable you to make the perfect choice. But before then, let’s briefly look at what prepaid and gift cards are. Shall we?

Understanding Prepaid Cards: What They Are and How They Work

Okay, let’s dive in. What comes to mind when you hear the two words “prepaid cards”? It’s all right, friend. Don’t stress too much.

Prepaid cards are simply a type of payment card. They can be loaded with funds in advance, like gift cards. You can’t spend more than the amount you have loaded on your prepaid cards, as is the case with credit cards.

Prepaid cards are a perfect fit for people who want to be on a budget or have a bad credit score. And the good thing is, someone doesn’t even need a bank account to own one.

These cards can be used anywhere debit cards are accepted. If you ever lose your prepaid card, you can cancel it and get it refunded. That sounds amazing, right? A good example of a prepaid card is the Visa prepaid card.

About Gift Cards: A Short Overview

Gift cards are a popular kind of prepaid card. They are available in various denominations. Store gift cards, also known as “closed loop” gift cards, can only be used at designated retailers. General-use gift cards are often referred to as “open loop” gift cards and can be used at a wide range of locations.

A gift card can be digital or physical. You can use them online or in-store, depending on the specific issuer. Gift cards are slowly replacing traditional gifts due to their convenience.

An example of a gift card is the Amazon gift card issued by the well-known e-commerce brand Amazon. 

7 Key Differences Between Prepaid Cards And Gift Cards

The differences between prepaid cards and gift cards are not mysteries. Reloadability, flexibility, security, gifting, fees, ATM usage, and point of purchase differentiate them.

1. Reloadability

Prepaid cards can be reloaded when the funds on them are exhausted. On the other hand, gift cards cannot be reloaded. However, some gift cards can be reloaded nowadays. An example of a reloadable gift card is the Mastercard gift card.

2. Flexibility

When it comes to flexibility, a prepaid card is miles ahead of a gift card. The reason is simple: prepaid cards can be used in virtually any store that accepts debit cards as a form of payment, which means a wide range of shopping options.

Gift cards are mainly used for purchases from the brand that issued them. Only a few gift cards, like the Visa or Mastercard gift card, can be used in any retail shop.

3. Security

Prepaid cards are generally more secure than gift cards. The reasons are not far-fetched. A lot of prepaid cards require PINs for transactions, unlike gift cards. You can also monitor your transactions through alerts for prepaid cards.

4. Gifting

Gift cards are the perfect fit for targeted interest and experience. Hence, there are the best gift choices for someone whom you know what interests them. Prepaid cards, on the other hand, are generic gifts that will unlikely resonate with the recipient.

5. Fees

One of the disadvantages of prepaid cards is the fee that comes with their usage. From the monthly maintenance fee to transaction fees, such is not the case with gift cards. Aside from the activation fee, there is hardly any fee associated with using gift cards.

6. Point of purchase

Gift cards are mostly purchased from the brands that issue them and a few designated retailers. On the contrary, prepaid cards can be bought from various locations, including banks.

7. Fund withdrawal at the ATM

Lastly, prepaid cards can be used to withdraw funds at ATMs like debit cards. Gift cards cannot be used to do so.

Frequently Asked Questions About Prepaid Cards And Gift Cards

1. Are Gift Cards The Same As Prepaid Cards?

No, gift cards are not the same as prepaid cards. While gift cards are a type of prepaid card, there are still some differences between them, such as flexibility and security.

2. Which One Should I Pick Between Prepaid Cards Or Gift Cards?

Choosing between prepaid cards and gift cards depends on your specific needs. If you want a flexible and reloadable card with high security, a prepaid card is the answer. But if you want a simple and convenient card with little to no fees associated with its usage, you should consider a gift card. 

3. Do Prepaid Cards Have Fees?

Yes. Fees are associated with the use of prepaid cards. It can be an inactivity fee, an ATM withdrawal fee, or a monthly maintenance fee.

4. Can I Use My Prepaid Cards And Gift Cards Online?

Yes, you can use your prepaid cards and gift cards online. However, it is advisable to always check with the retailer to see if they accept your specific type of card.

5. Can You Withdraw Money From A Prepaid Card?

Yes, you can withdraw money from a prepaid card. However, it depends on the specific type of card. For example, the Visa Vanilla prepaid cards allow withdrawals at the ATM.

6. Can I Turn My Gift Card Into Cash?

Yes, you can turn your gift card into cash by selling it on reputable platforms like Cardtonic. It’s an easy and fast process.

Conclusion

I strongly believe that by now, you won’t still be taking prepaid cards and gift cards for the same thing. The key differences between them remain reloadability, flexibility, security, gifting, ATM usage, fees, and point of purchase.

Choosing between prepaid cards and gift cards is no rocket science if you know what differentiates them. It also boils down to what you actually want. 

The upshot is that if you want a virtually limitless card with high security, a prepaid card is your best bet. But if you are uncomfortable with paying endless fees for using a card, then go for a gift card instead. It’s that simple, buddy.