What Is The Distinction Between A Pay As You Go Card And A Credit Card?

What Is The Distinction Between A Pay As You Go Card And A Credit Card?

This is one of those questions that some shoppers might not really be able to reply, even if they've used both sorts of card. This could particularly be true because the pay as you go and credit cards may look very comparable and are both easy to use. You merely punch in your PIN number every time you need to make a withdrawal or purchase.

Nevertheless, with a prepay card you solely spend the cash that you've preloaded on the card. So you can not run up debt. With a credit card, each time you spend on it, you might be borrowing money, which, if you do not repay it back when your monthly statement arrives, you can be charged interest on.

The place can the cards be used?

Both sorts of cards may bear a model name (eg the MasterCard image), which may imply that they're widely accepted wherever the emblem is displayed. Certainly, each types of plastic may typically be used to:

withdraw money from an ATM in the UK;
withdraw cash from an ATM abroad;
purchase goods and providers online and over the telephone;
make purchases in shops, restaurants, garages and many others; and
pay for bills.
So what are the opposite variations?

So far, the cards could seem similar. One of the foremost variations, then, may be in who can get a credit card or Prepaid Visa cards card, and the way much every one might cost you.

The central difference here is that, as discussed above, credit cards are strategies of borrowing cash from a bank or card provider. Prepaid cards alternatively solely contain spending cash that you simply yourself have loaded onto the card. There is no borrowing concerned with a pay as you go card.

Therefore the attitudes of the card issuers could also be different. As a pay as you go card user, you are merely spending cash that you have already placed on upfront. As a user of a credit card, you might be spending cash that you haven't yet paid the card company. Accordingly this presents a risk to the card firm that you could be not be able to pay the money back.

Applying for cards

On condition that there isn't a risk concerned to a pay as you go card issuer (as you are not borrowing cash from them), there is typically no credit check to pass with a view to qualify for one. However, non pay as you go card providers might insist that you simply pass a credit check with flying colours so that they can have some confidence that you are likely to be able to afford to repay the sum that you've got borrowed.

Charging methods

Finally, one other significant distinction between the two types of card is the best way in which you could be charged for utilizing them. Customers of pay as you go cards may typically be charged fees for performing particular actions, like topping up and making withdrawals. With prepaid cards such charges are transparent.

With credit cards then again, the interest that's charged might drag on for months and months (and perhaps even years) you probably have not been able to pay it off quickly, making the purchases that you've got made on them probably very expensive certainly!

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