Prepaid Credit Card vs Department Store Gift Card

A prepaid credit card is not actually a credit card because you are not spending "credit" when you use it. Instead, you pay a vendor upfront to issue the card for a certain limit. Once you have exhausted that limit, you will have to reload the card in order to continue purchasing. This concept is not unlike a department store gift card, but there are a few key differences.

Similarities between a Prepaid Credit Card and Gift Card

  • Activating the card: With both types of card, you will have to activate the card by paying a given sum. With a department store gift card, you will likely just pay a $5 to $10 premium on the card, and it will be issued with the remaining sum. A prepaid credit card calls this a fee, but it is essentially the same thing.
  • Loading the card: Both options will require you to load the card with an initial sum. Department store gift cards are typically preloaded with sums between $50 and $500. Prepaid credit cards can be issued in a wider number of amounts, but in both cases you will simply have to pay the sum you would like the card issued for to the vendor.
  • No loaned money - Both forms of cards do not use loaned money. As such, you will not owe interest on any purchases made on either card. You are only spending the money you already loaded onto the card.
  • Like cash - When something is "like cash," anyone can use it. This means, if you lose your card, someone else can pick it up and spend it. Your name does not appear anywhere on the card. It also means you cannot "deactivate" the card if it is lost or stolen like you can with a typical credit or debit card.

Differences between a Prepaid Credit Card and Gift Card

  • Where you can use the card - Department store gift cards can only be used in the store they were purchased. They are often given as gifts when the purchaser does not know precisely what to buy but knows the person can find something to enjoy in the store of choice. The gift card can then be used on any purchase within that one location. A prepaid credit card can be used anywhere credit cards are accepted, including for online purchases or to make reservations.
  • Reloading the card - Department store gift cards cannot usually be reloaded. They are issued in a given amount before they are even purchased by a user, and once this amount is spent the card has no further value. A prepaid credit card, on the other hand, is often reused over and over and reloaded each time. The user pays a fee to reload the card. Prepaid credit cards are often mechanisms for people who are not credit worthy to have a credit card. Credit cards may be required by a number of vendors, like airlines, in order to make a purchase in advance.

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