What’s The Difference Between Credit Cards and Prepaid Cards?

By Bob Atoo
February 12, 2014

And why might you want to use one.

These days, if you head out to the shops for some retail therapy, it’s likely that you’ll use a card to make your purchases. In fact, the number of people using cash to pay for items in everyday life is diminishing. According to the UK Cards Association, 9 out of 10 adults carry debit cards and use them to make purchases in day-to-day life. It’s safe to say that using credit or debit cards makes our lives significantly easier, but it is also true that it can be a lot safer than carrying cash around too.

Here at Bobatoo.co.uk, I offer two different card options, both of which are suited to different lifestyles. If you are looking for a card that isn’t linked to a bank account, one of these might just be the right card for you. But if you’re wondering exactly what the difference between prepaid cards and credit cards is, listed below are some examples of why you might want to use one or the other – or even both!

It’s worth mentioning here that both of these cards look the same and are linked with Visa and Mastercard. This means that you can use them anywhere in the world, provided Mastercard and Visa are accepted!

Prepaid Cards

Prepaid cards are sometimes called cash cards and they actually work in the complete opposite way to credit cards. Instead of spending money on credit, you only spend what you load onto the card yourself. Basically, you don’t spend money that you have borrowed and only spend the money that you have. There is also no overdraft facility on prepaid cards, so once you have spent what’s on your card – you’ll need to top it up again – you can do this regularly or whenever it suits you.

Prepaid cards are extremely useful and can be used by anybody as there are no credit checks. Our card even allows you to have your salary paid into it and set up direct debits if you don’t have a bank account.

According to Which?, they can be useful to better manage money, use on holiday and also for kids to take on school trips. Because you pre-load cash onto prepaid cards, there is less risk of becoming over drawn or in debt. Equally, using a prepaid card can be safer, as you are not carrying around large amounts of cash – many people use them for internet shopping too so they don’t have to reveal their bank or credit card details.

Another benefit to using prepaid cards is that they’re ideal for those who may not have the best credit history. When applying for a prepaid card, there are no credit checks and you don’t need to have a bank account. In addition, they offer the same amount of security and fraud protection as a credit card – meaning your money is just as safe as it would be if you took out a credit card.

Credit Cards

In very basic terms, credit cards allow you to pay for goods and services without using your own money upfront. A credit card company will agree with you the amount of money you are allowed to spend, which will either be paid back in full by a certain date or paid off in installments (usual minimum is 5%) over a period of time with interest added. Whether or not you are approved for a credit card is dependent on your credit history, with many credit card providers rejecting applications for those who don’t have great credit.

Here at Bobatoo.co.uk, I’ve taken time to find great credit card products to suit people in different situations. Whether you have a good credit history or one that isn’t quite so good, there may be a credit card to suit you.

The Luma Card

This card is designed for people who have a less-than-perfect credit history. Whilst you will still be credit checked when applying for a Luma card, the eligibility requirements aren’t quite as strict as other credit cards. In fact, this credit card option may accept you if you have no credit history or if you have had County Court Judgements (CCJs) in the past.

Typically, the Luma Card offers a £1,500 credit limit and has no annual fee. It can be a useful option for those who want to build their credit rating, as well as use a credit card that is easy to manage.

The Fluid Card

This card is ideal for people who have a good credit history. One of the great benefits to this card is that it offers 0% on balance and money transfers for up to 27 months. In addition, there is a unique Eligibility Checking process in place when you apply for a Fluid card. This means that you’re told whether you’re likely to accepted for the card without it affecting your credit record so lenders will not be able to see that you weren’t approved.

The Fluid card also allows for contactless payment, online and mobile management, as well as 24/7 fraud protection.

These are the prepaid card and credit card options that I offer here at Bobatoo. If you have any questions or want to find out more, why not connect with me on Twitter? Alternatively, you can visit my contact page.