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. So let’s explore the difference between 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.
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 and their rates are different from another. Gift cards are issued by many merchants like Amazon, Visa, AmericanExpress, MasterCard, and Google play store where these gift cards can be used to buy gift 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 gift 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
1. Flexibility
Prepaid cards provide more flexibility than gift cards, as you can use them at almost any store that accepts debit card payments. This enables access to more shopping options without restrictions due to store or location.
You can only redeem gift cards for products or services from the brand that issues them. This applies to most gift cards except Visa or Mastercard gift cards, which you can use at any retail store.
For instance, the Amazon store is the only place to redeem your Amazon gift card, as the card use may not be acceptable at any other store. This also applies to the Steam gift card, which you can use only at the Steam store. However, prepaid cards give you flexibility that gift cards do not have.
2. Reloadability
While you can reload your prepaid cards when you exhaust their funds, you can not do the same to gift cards. This is because issuers design gift cards with a fixed value, which is why we have gift cards existing in various denominations.
Nonetheless, Mastercard gift cards can be loaded, which is the only exception, although this is still an emerging concept in gift cards.
3. Security
Unlike gift cards, prepaid cards are more secure than gift cards, and many prepaid cards require PINs to initiate transactions. You can also monitor your transactions through alerts for prepaid cards, which gift cards lack.
Notably, prepaid cards have a few more protection mechanisms designed for them, so you can block them from further use when stolen or lost. However, a gift card does not have this protection system, so it loses funds when lost or stolen.
4. Gifting
Prepaid cards are generic cards that serve broader purposes without necessarily serving the preferred needs of the recipient at a given time. This makes gifting prepaid similar to providing your recipient with some money without direction.
However, gift cards are widely designed and tailored to achieve a specific purpose. That is why we have gift cards for video gamers, gift cards for teachers, gift cards for male students and gift cards for female students. This makes gift cards a better option than regular gifts.
6. Fund Withdrawal At ATM
Let’s reiterate that prepaid cards are debit cards you can use to withdraw funds from ATMs. A typical example is using Visa prepaid card to withdraw from the ATMs that support Visa. Others are Mastercard and AMEX prepaid cards that facilitate this purpose.
Meanwhile, you can not use gift cards to withdraw funds from the ATM. So if you are holding an Amazon gift card, you can not use it at the machine. However, you can convert your gift card balance to Cash App funds, which you can withdraw as cash from the platform.
6. Point Of Purchase
You can buy prepaid cards from credit card issuers or banks, making it easier to purchase the card and load it with your preferred amount. This contrasts gift cards you can buy from the brand that issues them or gift card trading platforms like Prestmit.
7. Fees
There is a fee that comes with using prepaid cards – which includes maintenance fees and transaction fees. However, this is not the case for gift cards, as there are no fees associated with using the cards except for the activation fee at the point of purchase.
Frequently Asked Questions (FAQs) About Differences Between Prepaid Cards And Gift Cards
Are Gift Cards The Same As Prepaid Cards?
Gift cards are different from prepaid cards, although the latter is a type of the former. However, factors such as flexibility, security, and other features differentiate the cards.
Can I Withdraw Money From A Prepaid Card?
Yes, you can get money from prepaid cards as they support withdrawal from the ATM. But confirming if this feature is still available for your card is important.
Can I Convert My Gift Card To Cash?
Yes, you can convert your gift card to cash by selling your card on a reliable and reputable platform like Prestmit. There are innovative features like a gift card rate calculator, advanced security, sleek interface, etc. that allow you to make profitable trading on the platform.
Which Is Better Between Prepaid Cards And Gift Cards?
The best card for you, compared to prepaid and gift cards, is a function of your needs. Prepaid cards are ideal if you want security, flexibility, and the ability to reload your card with funds. But you may consider gift cards when you want convenience and low fees during use.
Conclusion
While prepaid and gift cards may seem to serve almost the same purpose, the article would have clarified the conundrum between the two cards. This is important to enable you to grasp the best card for you.
Therefore, knowing the purpose of the card you are getting served before acquiring it is important. This is to enable you to get the best value for your card.
