What is the difference between a prepaid card, debit card, credit card and virtual card?

Credit and debit cards are the backbone of online transactions today. They enable you to send, receive and withdraw funds globally among other things. However, due to their similarity and newer variations like virtual cards and prepaid cards, most people tend to confuse one for the other.

This article discusses the different kinds of cards, making a distinction regarding their functions, how they operate and their uses. Let’s get right into it. Wait, we wrote a piece on blockchain unconfirmed transactions, read about it.

Credit cards Vs debit cards

The first distinction to make before going into the different variations is between debit cards and credit cards. A debit card allows you to carry out transactions directly with the money available in your account while a credit card allows you to spend money that is debited from your bank instead of your account. This way, they are granting you credit.

With debit cards, you pay from the money you have in your account and the cards are accepted globally and are usually either Visa or Mastercard. However, there are other types like Verve that can only be used domestically and sometimes, you need to understand how to activate MasterCard for online transactions for it to function. 

What are the differences between credit cards and debit cards?

Debit cards are linked to your bank account, therefore, all payments and withdrawals you make are debited from the account. This eliminates the risk of spending borrowed money but you have to keep an eye on the money in your account so nothing goes awry. Also, some banks allow overdrafts, for those who need to spend more than they have in their account. However, you need to pay back with interest which could be expensive. 

With credit cards, on the other hand, your bank pays for your expenses and offers you a credit which you have to repay with interest at a later time. Normally, you have to pay your credit invoice at least once a month in part or full depending on the bank. Credit cards give you leeway because you wait till the end of the month before paying what you already spent. 

This is why they are called credit cards – the money you spend is actually loaned to you by your bank or financial institution that issued the credit card to you. During the application process, you chose the ceiling of your revolving credit. Ensure you choose a reasonable limit. This should be something you can meet up with at the end of the month (taking your income into consideration) to not enter unpayable debts. Your total spending is deducted at the end of the month from your bank account. 

Read more on the differences between credit cards and debit cards.

What is a virtual card? 

A virtual card is simply a digital card that can be stored on your phone and used for making online and offline payments. Just like an ordinary card, it has its own unique card number, expiry date and CVV.  The word “virtual” speaks more to its nature of being electronic and not physical, rather than its use. Therefore, you can have any type of card exist in a virtual form.

Essentially, the only difference is that it is virtual and not physically like a standard card. A virtual card could either be a credit, debit or prepaid card, therefore, you have virtual credit cards and virtual credit cards. 

What is a virtual credit card? 

A virtual credit card is exactly used the same way as a credit card except for the fact that it is not physical. A virtual credit card is essentially an electronic credit card. With virtual credit cards, you receive a unique 16-digit number unique to your card, along with the expiry date and CVV. Your virtual credit card is linked to your credit card, therefore, you can use it in place of your normal credit card anywhere.

What are the pros and cons of a virtual credit card? 

Here is a rundown of the pros and cons of a virtual credit card: 

Pros

• They are easy to create as it takes only a few seconds
• You can make payments anywhere and anytime without needing a physical credit card
• Some virtual credit cards to allow you to earn points on purchases which can be redeemed in different ways
• Virtual credit cards are easy to cancel if your card gets compromised

Cons 

• They come with high-interest rates 
• You can incur credit debt beyond your earnings as they still operate like a credit card
• Virtual credit cards have a limited lifespan. This could become a problem when you return online purchases and request a refund but the card has expired and doesn’t exist anymore.

What is a virtual debit card?

A virtual debit card operates exactly the same way as a physical debit card except that it is completely electronic. Similarly to a physical debit card, you get a unique 16-digit card number, expiry date and CVV. Virtual debit cards are linked to your bank account. They could also be crypto cards too

What are the pros and cons of a virtual debit card? 

The pros and cons of a virtual debit card include: 

Pros

• Virtual credit cards cannot be lost as opposed to physical cards as they are electronic
• They can be set up as single-use or at specific periods where they are available

Cons

You need to keep an eye out on your account balance because transactions will not go through if funds are insufficient

What is the difference between virtual cards and physical cards? 

The major differences between a virtual and physical card include: 

• Although no card is certified hackproof, virtual cards make use of temporary account numbers for transactions, therefore, reducing your chances of being hacked
• Virtual cards are easier and more user-friendly than physical cards, especially for account management and lodging formal complaints for lost or stolen cards
• You can alter and create new card numbers with virtual cards for extra security compared to physical cards

What is a prepaid card? 

A prepaid card is simply a preloaded card that you can use to pay for things online. Essentially, you purchase a card with money loaded on it or you load your desired amount yourself and proceed to use it to purchase items. Prepared cards are also called store value cards. They could be physical or virtual like conventional credit and debit cards and are not linked to your bank account. 

Is a virtual card the same as a prepaid card? 

No, they are not. A virtual card refers to a card that is completely electronic and without physical form, while a prepaid card is a preloaded card that is not linked to your bank account. Virtual cards can be either credit, debit or prepaid cards and prepaid cards can be physical or virtual credit and debit cards. 

Prepaid cards vs debit cards

The major difference between prepaid cards and debit cards is that a prepaid card is not linked to a bank account but instead, you’re spending money loaded on it. On the other hand, a debit card spends money directly from your bank account. For both cards, you can’t spend more than you have. 

However, overspending can sometimes occur on debit cards if you opt for the overdraft program. If you opt for this, your bank may charge you extra fees on the purchase or withdrawal made and they require you to repay the overdraft.

Prepaid cards vs credit cards

The major difference between a prepaid card and a credit card is that prepaid cards are preloaded and you can only spend the amount on it while a credit card lets you spend while your bank pays for it. With a credit card, you are borrowing money, while prepaid cards limit you to the amount you loaded on it in advance.

What is the difference between a virtual debit card and a debit card? 

A virtual debit card is linked to your bank account where deductions are taken from, while for a virtual credit card, the bank pays for transactions on your behalf. Therefore, with a virtual card, you are taking out a loan.  

Is a virtual card a credit card or a debit card? 

Virtual cards can both be credit cards and debit cards. This all depends on what you set it up as. The term virtual simply refers to the fact that the card is completely electronic and not physical. 

Enjoy limitless global payments with Bitmama Virtual Cards

Bitmama virtual cards allow you to make online local and international payments with a single click. You can also pay for spotify with it, see our post on how to pay for spotify in Nigeria. It is easy to set up and you can start using it right away. 

Get started by downloading and registering on the Bitmama app for Android or iOS today.