The world has transcended into a digital and cashless economy. Different types of cards have been initiated to fulfill the cashless policy which everyone seems to be fast adapting to. However, these plastic cards have different purposes for which they were invented, different features, different policy systems but all serve the same purpose of making a purchase.
Let’s have an overview of prepaid cards and gift cards.
What Are Prepaid Cards?
Prepaid cards are a species of debit card issued by banks or credit card companies like Visa, MasterCard, and Discover. Prepaid cards are normally preloaded with an amount of cash which can be used online to make purchases or pay bills. They can be used to withdraw cash at ATMs. They have a unique number and an expiration date printed on the front or back of the card.
However, prepaid cards can also be in the form of a credit card, issued by the same companies or banks. It functions like the traditional credit cards which allow the cardholder to maintain a considerable balance and receive monthly bank statements. However, the approval of this type of prepaid card is strictly on the provision of collateral for the issuer, it helps mitigate losses if the cardholder fails to pay.
What Are Gift Cards?
Gift cards are cards preloaded with funds for future transactional use. Gift cards are issued by many merchants like Amazon, Visa, AmericanExpress, MasterCard, and Google play store where these cards can be used to buy items in their store. Gift cards contain a specific amount of money which when exhausted, cannot be used again.
There are open-loop gift cards and closed-loop gift cards.
Open-loop gift cards allow the cardholder to buy items from any retail store where the regular gift card is accepted as a means of payment, irrespective of the card brand.
A closed-loop gift card only allows the cardholder to make purchases from specifically designated stores, normally the card’s merchant stores or affiliated stores.
Differences Between Prepaid Cards and Gift Cards.
Though prepaid cards and gift cards share many features, it is important to notice that they also share some disparities. The differences between prepaid cards and gift cards are mainly;
- Prepaid cards can be reloaded while gift cards cannot be used once the loaded fund is exhausted, though recently, some merchants issue reloadable gift cards.
- There are usually monthly charges on prepaid cards but there’s is no such charge on gift cards.
- Prepaid cards are generally accepted at every retail store but not every gift card is accepted at all retail stores.
- Gift cards come with a preset money denomination, prepaid cards are issued with any amount of choice.
- Prepaid cards can be used to withdraw funds from the ATM, gift cards can never be used at the ATM.
In conclusion, prepaid cards, and gift cards were initiated for the purpose of making a purchase but these cards operate differently and independently. Their usage depends on the choice and flexibility of the owner. You should not confuse one for other.