Buy prepaid debit card with credit card

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

When you break out your plastic payment at checkout, generally the cashier or online payment portal makes no distinction between a credit card, a debit card or a prepaid debit card. All three carry a major credit card company’s branded logo, usually Visa, Mastercard or American Express. And you can use all three types of cards for both brick-and-mortar and online shopping.

But there are differences among the three payment options. Whether you carry a credit card, a debit card or a prepaid debit card in your wallet can make a big difference in your finances.

What Is a Credit Card?

A credit card is a payment card issued by a bank that lets the cardholder borrow money, up to a set amount, to make purchases in stores or online. The purchases can then be paid off over time, with payment due dates that must be observed and interest charges that can accrue.

The amount you’re allowed to spend on a credit card—known as your credit limit—is determined by factors including your credit score, payment history and income. As long as you meet your minimum payments, your card issuer will allow you to spend up to your limit.

That means if you have a $3,000 limit on your credit card, you can spend up to $3,000 on the card. However, you must pay interest on the unpaid balance left over after one billing cycle—and the interest can be expensive. In August 2022, the average credit card annual percentage rate, or APR, was 16.27%, according to Federal Reserve data. But rates can reach 36% or higher.

When used correctly, credit cards can function as an interest-free loan, but you’ve got to pay the balance in full by the due date.

How To Get a Credit Card

Here’s how to land a credit card, step by step:

1. Check your credit score.
2. Compare credit cards available to people in your credit score range, and choose one with your desired features.
3. Fill out the credit card application.
4. Wait for your card to arrive by mail.
5. Activate your card.

Pros and Cons of Credit Cards

Credit cards have these advantages and drawbacks.

Pros

• A credit card builds credit. Two factors that impact your credit score are your payment history (responsible for 35% of your score) and credit limit utilization (30%). Paying your credit card bills on time—every time—and keeping your balances under 30% of your credit limit are key to building credit.
• You get a grace period. A credit card’s grace period is the time between the end of your billing cycle and your payment due date. Grace periods last at least 21 days, and you’re not charged interest during that time. If you pay your credit card balance in full by the due date, you won’t owe any interest.
• Credit cards come with safety features. The Fair Credit Billing Act caps your liability for unauthorized credit card use at $50, and many credit card issuers waive the $50 liability as a courtesy. That means you won’t find yourself on the hook for fraudulent charges.
• You can earn rewards and cash back. Rewards credit cards allow you to earn points and airline miles, and the best cash-back credit cards help you get money back on your everyday purchases, such as groceries and gas.

Cons

• You may be charged fees. Some credit cards carry an annual fee—an amount you must pay yearly to continue using the card. If you carry a balance, interest fees come into play, and they’re often steep.
• It can be easy to overspend. When you buy something with a credit card, the money isn’t immediately taken from your bank account, as with a debit card, or deducted from your available card balance, as is the case with prepaid cards. So, controlling your spending with credit cards may be more challenging.
• A credit card can hurt your credit. When used correctly, credit cards can help build your credit and raise your credit score. But if you overspend on your cards or miss payments, you can do more harm than good to your credit. It’s crucial to use credit cards responsibly and not as a way to spend above your means.

What Is a Debit Card?

Like a credit card, a debit card is a payment card issued by a bank that allows you to make purchases, either online or at a traditional store. Purchases made with your debit card come directly from your checking account. If you buy an item for $50 with your debit card, $50 will be automatically deducted from your bank account balance.

In short, your purchase power with a debit card is determined by your bank account balance rather than a credit limit. Debit cards also offer a free or low-cost way to withdraw cash from an ATM, while credit cards charge an often pricey “cash advance” fee at a cash machine.

How To Get a Debit Card

Here’s how to put a debit card in your wallet, step by step:

1. Compare banks and credit unions, then choose one that has minimal fees.
2. Open a checking account in person or online.
3. Request a debit card for your account.
4. Activate your card.

Pros and Cons of Debit Cards

Debit cards have these pluses and minuses.

Pros

• Debit cards can make it easier to manage your spending. Because you can only spend what you have in your bank account, debit cards discourage excessive spending and help you live within your means.
• They provide access to cash. If you ever need cash, a debit card allows you to withdraw funds directly at an ATM or receive cash back when you make a purchase, often at a grocery store or pharmacy. You can withdraw funds using your credit card—known as taking a cash advance—but you’ll pay hefty fees to do so.
• There’s an easy application process. Generally, it’s easier to apply and be approved for a debit card than a credit card. Simply apply for a checking account online or in person at your chosen bank, and request a debit. If you have a negative banking record, look into a second chance checking account.

Cons

• You can face overdraft fees. You may incur overdraft fees if you spend more than you have in your checking account. If you’re concerned about overspending, ask your bank if you can opt out of overdraft protection, which allows you to exceed your balance but often face a fee for the privilege.
• A debit card limits your spending power. With a debit card, you can spend only what you have in your checking account. A credit card allows you to borrow against a credit limit.
• Debit cards have less liability protection from fraud than credit cards. Debit card holders face no liability if they report a lost or stolen card immediately and before any charges are made. But they may face up to $50 in liability if they report within two business days, and may incur up to $500 in liability if they report the loss or theft after two business days and before 60 days. After 60 days, the liability is unlimited.

What Is a Prepaid Card?

Prepaid cards are a safe and convenient cash alternative. You can use a prepaid card to buy items online and in stores. Prepaid cards are not linked to a checking account. Instead, you must load money onto the card before you can use it—similar to a gift card.

Any money you spend with a prepaid card is deducted from your card balance, not your bank account. You can spend only the amount you load or “prepay” onto the card.

You don’t need a bank account to use prepaid cards, which is why they appeal to people who are unable to access traditional banking.

How To Get a Prepaid Card

Here’s how to obtain a prepaid card, step by step:

1. Compare prepaid card options.
2. Buy a prepaid card online or in person at a supermarket, drugstore or big-box retailers, such as Target or Walmart.
3. Register the card, if necessary.
4. Load money onto the card.
5. Start spending.

Pros and Cons of Prepaid Cards

Prepaid cards have these positives and negatives.

Pros

• A prepaid card can help control your spending. You can usually spend only as much as you load onto a prepaid card, making overspending less likely than with a credit or debit card.
• You have several methods to load money onto a prepaid card. Your options include: a paycheck direct deposit; a transfer from a bank account or another prepaid card; or a reload at a store or financial institution that services the particular card. You may be able to reload your card by phone.
• Prepaid cards can be more secure than cash. The Consumer Financial Protection Bureau requires prepaid card issuers to provide customers with the same liability and loss coverage required for debit cards, including no liability if they report a lost or stolen card immediately.

Cons

• Fees can be stiff. You may find fees for activating and reloading the card, monthly service fees and transaction fees for certain types of transactions. The card may also charge balance inquiry fees, bill payment fees (if you use the card to pay a utility or other type of bill), ATM withdrawal fees and inactivity fees, among others.
• Some prepaid cards now feature overdraft protection and accompanying fees. Generally, you can’t spend more than you load onto a prepaid card, but changes in recent years have allowed cardholders to dip into the red—and face overdraft charges.
• A prepaid card is not a credit-building product. A prepaid card won’t help you build credit, unlike credit cards. The upside is if you overspend, it won’t negatively impact your credit. Essentially, prepaid cards won’t help your credit, but they won’t harm it either.

Which Card Is Best for You?

Depending on your financial situation, any one of these types of cards may be the right fit for your needs.

Credit cards can help you build your credit and extend your purchasing power while giving you maximum protection from fraud liability and access to rewards perks. However, not everyone can qualify for a credit card.

Also, the revolving credit line can be a spending temptation for those who need solid guardrails on their finances. The high interest rates on credit card balances can make your purchases much more expensive than their sticker price if you don’t pay off your card every month.

Debit cards are a concrete way to enjoy the convenience of card payments without giving yourself access to more credit than you can handle. With a spending limit equal to your bank balance, debit cards protect you from spending more than you have—but they do not keep you from spending all that you have.

Debit cards do not help you build credit, and they are unavailable to anyone unable to access traditional banking. In addition, debit cards have fewer protections against fraudulent purchases.

Prepaid cards make sense for any individuals unable to qualify for either a credit card or a traditional bank account. They are also a good choice for anyone who needs strict boundaries around their money, since it is impossible to spend more than you have preloaded on the card. The recent expansion of liability protections on prepaid debit cards means they are now as safe from fraud as debit cards, provided you have registered your card with the issuer.

But prepaid cards often come with many fees that credit cards and debit cards do not have, making it expensive to access your money. Also, the use of a prepaid card does not help you build credit.

Credit Card vs. Debit Card vs. Prepaid Card

Though credit, debit and prepaid cards all share some similarities, they have a few notable differences.

Spending power will vary depending on the type of card you choose. When you use a credit card, you’re borrowing money from a preset credit limit. When you use a debit card, you’re spending money from your bank account balance. Prepaid cards are not connected to a bank account; you usually can spend what you’ve loaded onto the card.

Fraud protection standards are different for each card type. Liability for unauthorized credit card use is capped at $50 in most cases, and many credit card companies give consumers a break on the $50. With a debit card, your liability for fraudulent charges may be $0, $50, $500 or more, depending on how long you wait to report a lost or stolen card. Prepaid cards now offer similar protections as long as you register the card in your name.

Credit-building power isn’t offered by all payment methods. Using credit cards responsibly—that is, keeping your balance low and never missing a payment—can improve your credit. Neither prepaid cards nor debit cards help you build credit, though they can help you stick to your budget and avoid the temptation to overspend.

Bottom Line

Most consumers will find that they use more than one of these types of cards for different kinds of purchases or transactions. You may carry two or three types of cards at once, or you may shift from one type to another as your financial circumstances change. Understanding what each type of card can potentially offer you—and cost you—will help you determine which is best for your financial needs.

Find The Best Online Banks Of 2023

Frequently Asked Questions (FAQs)

Is it safer to pay by credit or debit card?

Credit cards offer more protection against fraudulent activity than debit cards. Most credit card issuers have zero fraud liability, while others cap liability at $50. Some credit cards also provide warranties and insurance on items you purchase with your card.

Can someone use my debit card without my PIN?

All debit cards require a PIN code, but the codes aren’t always used. For example, someone who steals your card and uses it at a store can bypass the PIN by choosing credit at checkout. However, they wouldn’t be able to use your card at an ATM, as PIN numbers are required for cash withdrawals.

How can I prevent my cards from being hacked?

With data breaches becoming more prevalent, your cards are vulnerable to hackers. You can stay vigilant by monitoring your account for suspicious transactions, signing up for fraud alerts, creating strong passwords and enabling two-factor authentication.

Can I buy a prepaid card with a credit card?

Can I buy a Visa prepaid card with a credit card at WalMart?

Can I buy prepaid card online with credit and use it to add money on Cashapp?

How to buy a prepaid debit card?