Prepaid Cards vs. Gift Cards

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Difference between Prepaid Cards and Gift Cards

Credit cards are being replaced with alternatives as credit card applications are being rejected- as many of the people have poor credit that is rejected by financial institutions. Debit cards, prepaid cards and gift cards are some of the alternatives that you possibly would have come across at one time or another or you likely would soon as the trend of carrying cash has almost vanished and more and more smart cards are being carried these days.

Prepaid Cards
Gift Cards

What Are They?

Prepaid cards are exactly like any other prepaid services where you pay at the first place and then use the benefits. The prepaid card account is similar to a current account with a debit card issued. Here, you deposit your money into your account and then you are provided with a card. The card is similar to a credit card in terms of functionality and can be used at all the outlets where you could possibly use a credit card.

Gift cards are not exactly the alternatives of credit cards but they are more popular in the market these days as alternatives to a normal gift wrapped present. These cards are not entitled to a specific name and therefore anyone could make use of it. They work in the same way as the credit card could be used, where the electronic authorization system gives them access to shopping. Gift cards are provided with additional security features.


The prepaid cards can be termed as prepaid credit cards where you can add as much as you can and no institution or recovery service is going to bug you to repay the debt. These act exactly as credit cards at all the authorized outlets with the accessibility to the financial institution's central database. These cards are entitled on specific name therefore, not everyone can gain access to them but only the authorized one.

Gift cards just look like the credit cards while they are custom tailored in terms of the templates as well as the features. Some of the gift cards can be used again by recharging several times. Gift cards have to be used within the organization that provides or covers the domain of the gift card and sometimes within a defined time period.

Different Types

Prepaid cards are of three types. Closed system prepaid cards are those cards that can be used at a single merchant only. Semi-closed system prepaid cards are those cards that have comparatively a wider domain then the closed ones: they can be used at couple of merchants around the same place. Open system prepaid cards that can be used anywhere around the world that accepts the services that the card is affiliated with: example of this is the prepaid debt cards that you get on opening an account.

Gift cards are of two types. The open loop gift cards are usually issued by a major financial institution like banks or credit card companies and these cards can be used anywhere within the domain of the financial institution. The close loop gift cards are those cards that are issued by a specific store or a restaurant to be used in their specific domain only.



The functionality of both the prepaid cards and gift cards are defining the selection that you need to make:

  • Gift cards are localized cards purposed to entitle someone with a specific amount to spend on a limited domain in whatever way that they want to.
  • Prepaid cards have wider functionality as they can be recharged and reused.
Which type of card is easier to use in stores?
  • Prepaid Cards
  • Gift Cards

Discuss It: comments 1

  • Guest
  • Amy C wrote on October 2012

How do you go about setting up a semi-closed prepaid card system? If I want to create this type of card system for a group of vendors in one area would I need special licensing? Is there a company that could help me set it up or do I go to a bank for that help?

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