Prepaid Cards vs. Debit Cards: Understanding the Differences

What are the key differences between prepaid cards and debit cards?

a) Prepaid cards are linked to a bank account, while debit cards are not.
b) Prepaid cards require a credit check, while debit cards do not.
c) Prepaid cards have a fixed spending limit, while debit cards can overdraft.
d) Prepaid cards are not widely accepted for online purchases.

Final answer:

Prepaid cards are not linked to a bank account and have a fixed spending limit, pre-loaded by the user. Debit cards are connected to a bank account, with purchases immediately deducted from your account. Using these cards, along with credit cards, doesn't affect the total amount of money in the economy but facilitates transactions.

Explanation:

The key difference between prepaid cards and debit cards is their connection to a bank account and their spending limit. Prepaid cards are not linked to a bank account and they have a fixed spending limit, which is the amount you've loaded onto the card. Once the funds are spent, you cannot use the card until more money is added, preventing an overdraft scenario.

On the other hand, debit cards are connected directly to your bank account and purchases are immediately deducted from the account. Though they don't usually allow you to spend more than the amount in your account, some banks do allow overdrafts, but you may be charged a fee. Unlike prepaid cards, debit cards do facilitate transactions by giving you easy access to your money, either through purchases or cash withdrawals.

In contrast, credit cards serve a different purpose as they provide a line of credit from the issuing institution rather than deducting funds from your personal account. Usage of any of these cards does not affect the overall quantity of money in the economy - they are simply different tools for facilitating transactions.