At some point in life, every person who deals with finances has definitely wondered about the difference between a Shopping credit card, debit card, and a prepaid card.

If you are one among them and want to know which of them you should use to pay your bills and which is best suited for shopping, don’t worry, we’ve got you covered. Read on…

  1. Credit card, Debit card or a Prepaid Card


  • Debit cards

A debit card is one of the most convenient ways to make purchases. Unlike credit cards, which can damage your credit, or prepaid cards, which must diligently have money deposited on into order to use, debit cards are connected to bank accounts. That means when you pay with a debit card for anything, money is directly drawn from your account and a hold is placed on the total amount of any given purchase.

While the hold is taking place, the merchant you bought from sends the transaction details to its own bank, and the funds are moved from your account to the merchant’s account. Usually, the entire process takes about a day or two to complete.

It is important to be up to date on any outstanding transactions and holds so that you do not make the mistake of overdrawing your account. When this happens, you may end up having to pay large overdraft fees from your bank. Depending on the bank, if you go an entire day over-drafting your account at more than one merchant, you could end up getting slapped with multiple hefty overdraft fees.

Your debit card also has a PIN that can be used during transactions or when withdrawing money from an ATM. PINs are an additional layer of security against theft. Because debit cards are connected to bank accounts, it’s easier to track suspicious and fraudulent activity and remedy such situations when or if they arise.


  • Credit cards

Credit cards are an ideal method of payment if you’re trying to establish a credit history. Credit card transactions allow consumers to borrow money from their line of credit. They are easy to use when making simple transactions at a variety of merchants around the world wherever MasterCard, Visa, Discover, or American Express is accepted. It’s a powerful tool because it essentially allows you access to an instant loan with a repayment term of whatever you want it to be.

While it’s always wise to pay off credit card balances each month to prevent the buildup of debt and credit problems, it’s up to the credit cardholder to decide when and how fast they want to pay off their balance.

It is important to note that credit cards usually have hefty interest rates attached to them. When card balances are carried over from month to month, you’ll notice interest charges on your account being added to your overall balance.

Apart from giving cardholders more access to money and helping them build a credit history, many credit cards also offer rewards programs, such as cashback. Cashback rewards allow cardholders to accumulate points whenever a purchase is made. Over time, those points can build up and eventually be exchanged for financial rewards, such as cash or gift cards.


  • Prepaid cards

Prepaid cards are an ideal choice if you are trying to stick to a budget or want to avoid falling into debt problems. These cards are preloaded with an amount of money, and cardholders are only able to use the money that’s loaded on the card.

Some prepaid cards allow cardholders to add more money to the card when the funds are depleted. However, others can only be used once, and when the money is gone, the card loses its usefulness.

Because prepaid cards aren’t tied to bank accounts, there’s no risk of over-drafting. Moreover, the cards are usually accepted anywhere that accepts major credit cards. On top of that, they can be used:

  • For online shopping
  • To pay bills
  • When making everyday purchases, such as groceries and gas

Like credit cards and debit cards, prepaid cards also have expiration dates. They can even be used to withdraw money from ATMs.


  • Which card should you go for?

Each of the three cards has its share of advantages and disadvantages.

If you’re looking for a simple card to make everyday payments without the hassle of overdraft fees and credit card interest rates, then prepaid cards are the way to go.

Debit cards have their own set of benefits, such as convenience. They’re also useful if you’re trying to avoid going into debt.

However, if you have solid credit and have the self-discipline to make monthly payments,

you may want to take advantage of using a credit card. Here are the reasons why:

  1. If you use a debit card, your balance gets debited soon. But with a credit card, you can earn interest on the balance for a few extra days.
  2. You get multiple offers on using credit cards in restaurants, movie tickets, flight tickets, etc.
  3. You can take credit cards from multiple banks without opening an account in that bank but for a debit card, you have to open an account and maintain the minimum balance in that account.
  4. EMI facility is also available with a credit card.
  5. Sometimes banks give a loan on the basis of your credit card expenditures and your bill-paying pattern without any documents and you can pay that as an EMI with your credit card bill.