Prepaid Cards Vs. Debit Cards: 3 Pros and Cons You Need to Know About

By Michael Chau

As you get older and start to have more money, you’re going to start spending more and therefore, will need to carry around more cash. In order to carry around large amounts of money while keeping your wallet compact, you should consider a bank card. Debit cards and prepaid cards are both great for this purpose. But, which one should you use? Let’s look at some pros and cons:

Let’s start with debit cards

On a basic level, a debit card allows you to swipe a card to use money in your bank account for purchases. What are the benefits of using this kind of card?

Spend only what you have

Since the money comes directly from your account, you can only spend however much money you have in your account. The worst that can happen is that you use up all your money; you can’t wind up in debt like with a credit card.

No application required

Unlike credit cards which require applications to obtain, debit cards are relatively easy to get; they are generally available at banks upon request.

They’re convenient!

You don’t have to pay bills at the end of each month like you do with a credit card, since the money is drawn directly out of your account for each purchase. You also don’t have to carry around a big check book or wad of cash.

Fraud protection

If someone gets their hands on your debit card, and spends money from your account, you can be held liable for a portion of the stolen money. This means you might not get all your money back! Credit cards offer more protection from fraud because they don’t hold you liable for fraudulent charges- you get all your stolen money back.

Transaction fees

Some banks have transaction fees for debit cards, so you have to pay the bank each time you use your debit card for a purchase.

Your credit score

You can’t improve or build up your credit score by using your debit card, since you are not borrowing money and then paying it back.

The Prepaid Card

Let’s take a look at something similar to debit cards: prepaid cards. These cards are, as the name suggests, pre-loaded with money by you or someone else, almost like a gift card.


Debit cards protect cardholders from debt because you can only spend however much money in your account. Prepaid cards add another layer of protection because you can only spend however much money is actually loaded into the card. In other words with a prepaid card, on top of avoiding debt, you can avoid spending all the money in your account because you set your spending limit.

Easy to obtain

You can obtain a prepaid card without providing any personal information so you can reap the benefits of having a prepaid card without risking identity theft.

The Disadvantages of a Prepaid card

Although prepaid cards offer convenience, they have several disadvantages.


Prepaid cards have lots of fees involved, so it may cost you a lot just to be able to use this form of plastic.

Lack of protection

There aren’t any laws that require your money to be returned to you if your prepaid card is stolen. Although most prepaid card issuers voluntarily offer protection against card theft, prepaid cards still aren’t as safe as credit cards.

If you run out of money...

Since you’re limited to the money inside the card, if the card runs out of money and you’re in an emergency situation, that would be a problem. You might have money in your account but your card is out of money and you can’t do anything about it.

Now that you have a basic understanding of prepaid cards and debit cards, you can figure out which kind of card suits your needs the best!