How Prepaid Cards Work Compared to Credit Cards

What Is a Prepaid Card?

A prepaid card is a payment card that is loaded with funds in advance. You can only spend the amount that has been loaded, minus any fees. There is no revolving credit line, no interest on carried balances and typically no traditional credit check for basic products.

Even though the word “card” is shared with credit cards, prepaid cards behave more like a stored-value account. They still run on major payment networks, which is why they can be used at many of the same merchants as credit and debit cards.

How Prepaid Cards Are Funded and Used

Documentation for prepaid cards usually describes the following elements:

• Loading methods – bank transfers, cash loads at partner locations, wage deposits or transfers from other accounts.
• Spending limits – maximum balance, daily spend, ATM withdrawal limits and point-of-sale limits.
• Card usage – where the card can be used (online, in-store, international), and any blocked merchant categories.
• Expiration and dormancy – what happens when cards or balances are unused for extended periods.

Unlike credit cards, there is no borrowing: each transaction reduces the stored balance, and usage stops when the balance reaches zero or a configured threshold.

Common Fees on Prepaid Cards

“Prepaid” does not automatically mean “no fees”. Fee schedules often include:

• Load fees – charges for adding funds via certain channels (for example cash loads).
• Monthly or maintenance fees – recurring charges to keep the account active in some designs.
• ATM withdrawal fees – charges for withdrawing cash, sometimes varying by ATM network or region.
• FX fees – markups on foreign-currency transactions when used abroad or online.
• Inactivity or dormancy fees – applied after long periods without usage, where allowed.

The official fee schedule is the primary reference for understanding how much a prepaid product can cost to use over time.

Prepaid vs Credit vs Debit: Structural Differences

From a documentation perspective, the three common card types can be contrasted as follows:

• Prepaid – spending is limited to loaded funds; no credit line; fees focus on loading, maintenance and usage.
• Credit – provides a revolving line of credit with interest and fees; statements show balances owed.
• Debit – draws directly from a bank account; fees and protections depend on account and region.

For students and first-time users, prepaid products are sometimes used as a way to learn card mechanics and budgeting without entering into a credit agreement.

Comparing Key Parameters for Prepaid and Entry-Level Cards

For a wider view of entry-level and student products, visit the Student & First Card hub on Choose.Creditcard .

Explore Related Student & First-Card Microsites

Part of The CreditCard Collection

PrepaidCard.Creditcard is one spoke in The CreditCard Collection — a network of focused microsites operated by ronarn AS. Each site explains a single concept in clear, factual language and then connects readers to broader educational hubs.

We do not issue cards or provide personalized recommendations. This page summarizes how prepaid cards and entry-level products are typically described in public documentation, so readers know where to look for key details.

This site is informational only and does not provide financial, investment, tax or legal advice. Always rely on official product documentation and consider seeking independent guidance for your situation.

Learn more about entry-level products in the Student & First Card hub on Choose.Creditcard.

Want to See How Prepaid Fits Into the Bigger Picture?

Use PrepaidCard.Creditcard to understand the mechanics of prepaid cards — then explore the Student & First Card hub on Choose.Creditcard to see how prepaid, student and entry-level credit products are described side by side.