Gift Card or Prepaid Card – Which Should You Choose? – Guest Post
We’ve all seen them, right there on the shelves at eye level on our way through the checkout aisle. They’re those plastic cards that are simply that, useless plastic, until they are loaded with any amount of money we choose. Gift cards and prepaid cards are becoming more widely available at nearly every store we enter. In the past you could only get a gift card to a certain merchant at their specific location, but now you can have your pick of gift cards for restaurants, book stores, or retail locations, at a variety of stores like WalMart, Target, or Walgreens.
Along with the plethora of gift cards you have probably also noticed some fairly new cards, referred to as prepaid cards. These cards can be given as gifts but function much more like a credit or debit card. They are not labeled to be used at a specific location but are usually branded with the Visa or MasterCard logo. Some of the popular brands you may have noticed in stores include the Green Dot Prepaid Card or the Yap Card.
Whether you are considering one of these cards for yourself or to buy as a gift there are few things you should be aware of before making a choice. While some of the differences between a gift card and a prepaid card are probably obvious, there are some details that you may not be aware of. And depending on your purpose for buying one of these cards you might actually change your mind about which best fits your needs after considering some of the following features.
Spending Ability – One way that gift cards and prepaid cards differ most is in their spending ability. Basically a gift card can only be spent at the merchant or family of merchants whose retail name is on the card. Even if the card is not purchased directly from that merchant it is only accepted at that location. Gift cards are generally limited to use within the United States as well and once the amount of money on the card is gone, it is useless.
The only exception to this limitation is if you purchase a gift card that carries the brand and logo of one of the major credit card corporations such as Visa, MasterCard, or American Express. These gift cards can typically be used anywhere but are often not accepted if there is insufficient funds on the card.
Prepaid cards on the other hand are widely accepted at any retail location, online, or even at hotels that accept the specific card type. As long as the card is loaded with sufficient funds you can use it for your spending needs and reload it as many times as you wish. Prepaid cards are also accepted in other countries and if you’re giving this card as a gift the user can spend it on anything they wish. They can then reload it themselves or you can give the ongoing gift of reloading it for them.
Security – When you purchase a prepaid card, whether you do it online or in the store, the card will be personalized with your name. This means that only you can use it and the funds you’ve preloaded are safe from others spending your money. Many of these cards also come with fraud and theft protection including MasterCard’s Zero Liability Protection Policy. If your prepaid card is lost or stolen you can report it immediately, have your card replaced, and will not be charged for unauthorized purchases.
In contrast, a gift card is never personalized and never comes with theft protection. If you lose a gift card whoever finds it is free to use it. The only way this misfortune can be avoided is if you record the ID number of the card in a separate location and immediately report its loss to customer service. Some companies will replace your card while others will simply tell you there is nothing they can do.
Reloading – Most gift cards cannot be reloaded, once the total amount on the card is spent, they are useless. If you have one of the few Visa, MasterCard or American Express gift cards you are able to reload them but can only do so by calling customer service and giving them a credit card number or providing cash.
Prepaid cards provide numerous options for reloading. Since they function much more like a debit card, it is almost like having your own bank account. Cardholders can reload their cards with cash, by purchasing a Green Dot MoneyPak, or by signing up for direct deposit, which is free with most prepaid cards. Cards can be loaded and reloaded as many times as you wish and often to not have a limit as to how much can be kept in your card account. Numerous prepaid cards also offer a text or email alert service to let you know when your funds are getting low.
Users – Gift cards are a popular choice when it comes to giving a one-time birthday, graduation, or special occasion gift. If the purchaser knows a specific venue the receiver enjoys shopping at then a gift card to that place is a wonderful present. Individuals of any age can purchase and use a gift card.
Prepaid cards are typically a less popular choice as a gift but are chosen more by individuals who need a form of spending that doesn’t involve cash, but for some reason they are unable to get a credit card. Typically prepaid cards can only be obtained by individuals over the age of 18. These cards are a popular choice among parents who want to give their teens some responsibility in their spending but still want to have some control in the amount they spend and where.
Money Management – The daunting task of managing and budgeting your money is much easier done with a prepaid card. Many of these cards feature an online account that can be accesses 24/7 so you can track where your money is going and how much is left. Some accounts even offer money management tools that break your spending up into the type of purchase, the time, and the location.
Gift cards do not typically come with any sort of account or money management system. The only way to keep track of how much is left on a gift card is to save the receipt from the last purchase, which typically displays a card balance or to call customer service with a balance inquiry.
While there are some similarities between a gift card and a prepaid card, for the most part they are two very different spending tools that serve different purposes. After considering your spending needs you will need to assess which is best for you.
In her free time, Nikki Thomas is a writer and editor for PrepaidCardsDB.com, a site dedicated to providing information about prepaid cards. You can visit the site to learn about the various cards on the market and find out which are the top rated cards. Nikki also writes informative articles about other financial topics such as managing your money and what to do if you have bad credit.