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Pros & Cons Of Prepaid Debit Cards vs Bank Debit Cards vs Credit Cards

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By Regina

Prepaid debit cards are becoming a popular option for those who want to pay closer attention to what they spend.

Here are some facts about the best prepaid cards to use at your favorite retailers

The idea is to use prepaid debit cards in place of credit and debit cards that are attached to banks — because the bank cards have higher credit limits and it’s easier to spend more than you intended to that way.

A prepaid debit card works exactly like a credit or debit card attached to a bank except that you can only charge up to the amount that you loaded on the card at the time of purchase.

Would you believe that prepaid credit cards are actually less expensive to use than debit cards that are attached to a bank?

That said, there are pros and cons attached to credit cards, debit cards, and prepaid debit cards. It’s important to know what the upsides and downsides are ahead of time, so you can choose the best card for your particular situation.


Prepaid Debit Cards Backed By A Bank



  • It’s very easy to rack up overdraft fees because your bank will still authorize transactions that take you over your limit. Then you will have to pay back the actual charge plus the overdraft fee(s) which can be as high as $35 per transaction.
  • Unless you use it regularly, your debit card may not help you build your credit score.
  • If your debit card and PIN are stolen, your entire bank account could get cleaned out.
  • You have to use a checkbook register to keep track of your purchases and avoid overdraft fees.
  • Some banks will charge you a non-sufficient funds fee or an over limit fee even if a merchant transaction is refused.
  • A debit card does not have the same protection as a credit card does. The longer you wait to notify your bank of fraudulent charges, the higher the amount you are responsible for.
  • If you have a dispute with a merchant, you don’t get as much support from the bank (as you would had you used a credit card).


Credit Cards Backed By A Bank


  • Credit cards give you more liability protection, in the event that you lose your card or someone steals your card and uses it.
  • If your card has rewards points, you can get frequent flyer miles or cash back later on.
  • Credit cards help to establish (or re-establish) your credit.
  • You get more protection on the purchases you make when you use a credit card — should an item be defective or not sold as described.
  • If you always pay off the balance of your card in full each month, then you have more time to accrue interest on your credit card.


  • You can just as easily bring down your credit score or even demolish your credit altogether due to poor spending habits with a credit card.
  • A lot of credit cards have annual fees.
  • The PIN number on your credit card is easier to steal with skimming devices (as opposed to making a transaction that is signature based).


Prepaid Debit Cards (No Bank Affiliation)


  • There is no way to get into deeper debt, since you cannot charge over the amount you loaded onto the card.
  • You can add money to a prepaid debit card any time you want to and as frequently as you like.
  • If you lose your prepaid debit card or it is stolen, your bank account cannot be drained.
  • There is no danger of ruining your credit, since you can only spend what you loaded on the card.
  • Prepaid debit cards are convenient because you don’t have to have to show a picture ID or punch in a PIN number.
  • Your prepaid debit card will be accepted anywhere credit cards are accepted.
  • There are some prepaid debit card companies that actually report your usage to the credit bureaus and this can help you to build your up your credit record.
  • You don’t have to worry about interest rates with a prepaid credit card because there are none.


See how others use prepaid debit cards.

Something else to keep in mind with prepaid credit cards is that there are hundreds of scams that have been associated with these cards.

They're each holding their best prepaid debit cards which require no photo ID.

Scammers use deceptive ads to find people who have poor credit (or no credit). What they offer you is a secured credit card. This is nearly the same as a prepaid credit card, and it’s also prepaid, but the card is attached to a bank.

The scammers often ask that you call a 900 number for which you can be charged up to $50 per call. Sometimes they will ask you to call more than one 900 number!

They usually ask for personal information such as your home address, phone number, place of employment, and possibly even bank account numbers. You should guard this information very carefully and do not give it out to just anyone who asks.

Because of these issues — and the fact that secured credit cards are attached to a bank — if you want to use a prepaid debit card, it’s best to buy one from a reputable company online or buy one at your local shopping center.