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Prepaid, debit or credit cards - the main differences

Before launching a card issuing program, our customers consider which card product to use. In this article we will summarize the key differences and considerations. 

There are three main groups of payment cards: pre-paid, debit and credit cards. Below we summarize the most important differences.

Prepaid cards

  • user has to reload a card account to use a card (like in debit cards by the way)
  • you can issue anonymous, non-reloadable gift cards
  • in some cases merchants block BINs of prepaid cards more often than for debit or credit cards
  • you can have consumer and business prepaid cards
  • in many countries, from legal perspective, there is no difference between prepaid and debit cards

Debit cards

This is the biggest group of cards in the world:

  • user has to have a payment account or current account connected with a card
  • user has to go through a KYC (Know Your Customer) process
  • user has to reload a payment account to use card
  • usually you cannot issue anonymous cards, because in general they are always reloadable
  • sometimes, if you give a loan to your customer, a debit card can work like a credit card
  • you can have consumer or business debit cards
  • you can have Gold or Platinum debit cards

Credit cards

  • user applies for credit and gets it in the form of a card
  • usually connected with a revolving credit (something like credit line) and a grace period (no interest for 40-50 days)
  • because of the credit, the user needs to go through KYC and credit scoring, so it is more difficult to issue than prepaid or debit cards
  • you can have Gold, Platinum or World Elite credit cards
  • you can have consumer or business credit cards
  • usually an interchange fee is a bit higher than in case of debit cards
  • sometimes approval rates for transactions are higher, some merchants (car rental) require credit cards from their customers
  • because credit line is connected with this product, usually it is more profitable than a prepaid or debit portfolio

These are the main differences between the above mentioned products. In most cases, you should be thinking about debit cards because they give you the same benefits as prepaid ones, and you can convert them into credit cards by giving loans to your customers.