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Debit card, credit card and prepaid credit card – find out the differences here

Published February 7th, 2022

There are several different cards that can be linked to an account. We explain the differences between the various card types here.

Many of us use a debit, credit or prepaid credit card on a daily basis to shop online or offline, to pay in restaurants or to withdraw cash. These different cards are an integral part of our daily payment transactions, but what are the differences between them?

Here we outline the different features of these cards and reveal what each card can do and how they work.

What is a debit card? 

Debit cards are mainly from Visa or Mastercard and accepted worldwide. They are among the cheapest and also most popular cards – making them ideal for everyday use. You usually get a free debit card with a current account. If you use it to pay for something or to withdraw cash, the amount is more or less directly deducted from your account, sometimes on the same day. That means you cannot spend more money than you have in your account and will maintain a clear overview of your finances. And that is also an advantage if you become the victim of fraud as it limits the potential loss. In exceptional cases and after consultation with your bank or banking provider, you can be granted the use of an overdraft facility and will be able to take more money out of your bank account than what’s in there.

What is a credit card?

At first glance, credit cards don’t look very different from debit cards: you can spend and withdraw money with both. But the money spent on a credit card isn’t instantly deducted from your account: your bank covers the cost for you, therefore giving you credit – hence the card’s name. The total balance of everything that you have paid for with your credit card is deducted from your current account monthly. Regular use of credit cards might make you overly reliant on them and you will end up spending more money than you actually have. If this becomes a habit, you could find yourself in debt that is hard to get out of. And you will also be charged interest. That’s why you should use a credit card with caution and only ever spend within your means. You can usually pay worldwide with a credit card; but unlike debit cards, credit cards are usually subject to charges.

What is a prepaid credit card?

The special thing about a prepaid credit card is that you don’t need a bank account to pay with it. You can top these cards up yourself with cash and use them to withdraw and transfer money, as well as make cashless payments. They are flexible and even anonymous, if you top them up with a maximum of €1,000. But they also have their drawbacks: depending on the provider of the prepaid credit card, there are usually limits for withdrawals, credit top-ups or the maximum payment transactions per year. So it might not be possible to use them anytime and anywhere and the limits on them could be insufficient for your needs. You should also check whether the provider of the prepaid card offers you deposit protection for your money.

The right card for your needs

Different cards suit different needs. Do you spend a lot of time abroad and want to be able to pay and withdraw cash worldwide? Will the card be accepted there without any problems? Are you willing to pay monthly costs and charges for your card? If the provider goes bankrupt, is your money protected by deposit insurance? These are all factors that you need to weigh up for yourself first. A debit card is ideal for everyday use because it is usually free of charge, you can use it to withdraw cash at ATMs or in stores and pay pretty much anywhere without problems.

As well as the type of card, you should also choose your bank or banking provider carefully: what is important to me in terms of values, what services and features do I expect and who can provide them? You can, for example, have your money work towards positive change by banking with a sustainable bank. In the Tomorrow app, you can open your secure and sustainable current account in a few minutes and will also receive a globally accepted Visa debit card free of charge.

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