Credit vs. Debit vs. Prepaid Debit Cards for Online Transactions

There are many bank cards that are offered by banks and other financial institutions that you can use for online financial transactions especially for buying products and services online. All you need is to provide your bank card details to these online companies and if you have sufficient funds to pay for these products and services your order will go through.

This online transaction is very convenient as evidenced by the exponential growth of online transactions especially e-commerce. When there is money however there will be robbers. It is a natural thing in life although unpleasant. This also reflects with online financial transactions. There are also tech savvy robbers who use technology and evil actions to steal from you.

But first we must explain what these 3 different cards are:

Credit Card

These are bank cards you could use to purchase goods and services both in physical stores and online. As the name implies you purchase goods in funds you credit to the financial institution like a bank. You are expected to pay the amount we credited to bank before the payment date expires. If you do not pay the amount in full then the bank will charge you interest fees.

One negative thing about a credit card is that it is connected to your bank account. There are financial institutions that can give you a credit card without a bank account but not many of them. Usually credit card issuers will require proof that you can pay the amounts you owe in your credit card. If you cannot provide proof then you will not own a credit card.

Another negative thing about credit cards is that you get charged an annual or a monthly fee for using one. The higher is your credit card spending limit the higher you pay. Financial institutions though would offer benefits the higher you pay for a credit card so be wise in spending and maximise the benefits of your card.

Besides monthly or annual fees financial institutions also charge service fees and other ancillary charges everytime you use your card for a financial transaction. The merchants too charge extra fees when you use a credit card to buy from their store. You may think it is small change but when they accumulate especially for big purchases the amount could be significant.

Debit Cards

They are now equivalent to your saving account cards. You can also use these cards to purchase goods and services both in physical stores and online. You also get charged annual fees and service fees but not as big as credit cards because you do not essentially owe any money to the financial institution but rather the financial institution charges you for handling your money for you.

One big disadvantage of debit cards is that it is directly linked to your savings account. If someone has access to your financial details they can easily empty out your savings account fund. There are financial institutions that have some safeguards to partially mitigate this loss. Some have daily withdrawal limits to ensure that your funds are not emptied in one go and maybe warn you of suspicious big withdrawals.

There are also banks that monitor suspicious withdrawal activities like online purchases done in another country or big consecutive withdrawals or when your bank account funds is in danger of being emptied. But as I have said not all banks do this and many now do not even provide regular bank statement reports to their customers.

Prepaid Debit Cards

These cards are the same as debit cards but are not linked to your savings account. You fund them separately by depositing the amount you want to them. This is their main difference from credit or debit cards. The amount of fund available for use in them is dictated by you and not by the bank or your savings account fund.

This means that if you want to purchase something using it all you need to do is to deposit the amount required for the purchase and nothing more. This has the advantage of not having extra funds remaining and sitting around online and in danger of being stolen by criminals. If you need to purchase more items you simply repeat the process. This is cumbersome but safe.

My Experience

I am still lucky that my savings account still has not been compromised but have experienced a situation when my bank called me to warn me that my credit card is being used in another country. Luckily my credit card was cancelled in time and my funds remained intact. This has left a lasting impression on me especially after reading about many hacking cases online where credit card and personal details are stolen.

I cut my credit card and was determined not to pay online for goods and services if I can avoid it. I then used a prepaid debit card for unavoidable online financial transactions. I felt safe using it online until the inevitable happened. My prepaid debit card which I have just funded and not used for several months was emptied of funds without my consent.

I do not know what happened and my bank was not cooperative about helping me track or know the details of the crime. One thing I know for sure is that if these things happen banks will protect themselves first rather than try to assist you. Do not expect sympathy from them. Another thing I knew is that if I had used a credit card or a debit card my loss could even be bigger if not a total loss of my entire savings.

Conclusion

Though prepaid debit cards are no safer than credit cards and debit cards when doing financial transactions online they can at least diminish your losses or protect you from the complete theft of your entire savings account funds. They may be cumbersome when you have to fund them repeatedly but criminals for one are relying on our laziness to steal our online funds.