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What’s the Difference between Pre-Paid Credit Cards and Debit or Credit Cards?

If you peek into the wallet of your average consumer, chances are that you would find more than one plastic card. With so many people opting to “swipe” for purchases rather than carry a wallet full of cash, it's really no surprise. From debit cards to credit cards, consumers have a variety of choices. It's important, however, to be aware of the differences in these cards since each bears a different financial responsibility.

Today, the majority of people who have a checking account also have a “debit card”. Debit cards often look like credit cards. The primary difference is that the owner is not purchasing off of a line of credit. When you swipe your debit card, you are spending money from that account whether it is a checking or savings account. Debit cards work in the same way as checks but with some important benefits. First, they eliminate the paperwork of a check. Second, when you use your debit card, funds are usually taken out of your account immediately. You don't have to wait days or even weeks for your check to clear the bank.

Pre-paid credit cards, or secured credit cards, are a bit different. For those people who want to enjoy the convenience of plastic without potential financial problems, some people choose to purchase pre-paid credit cards or to sign up for cards in which they have to deposit funds. The consumer actually purchases a card with a certain amount of money allotted to it. They can then use that card in the same way as they would use a credit card, but they will not be able to continue to use it once the funds are entirely depleted. While the concept is the same as a debit card in some ways, people often purchase these for cases where debit style credit cards are not accepted.

Credit cards are a concept entirely different from pre-paid credit cards and debit cards. A credit card also comes with a greater responsibility. An unsecured credit card is a card given to consumers with some type of limit. That stands for the line of credit that the consumer is given. The great responsibility comes with the fact that the consumer has to make monthly payments on that debt. While it's smartest to pay the account in full, many people choose to make lower payments. This means finance charges and interest accrues, often leading to very large bills.

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