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Should I Buy A Gift Card Or Prepaid Card? Gift Cards Or Prepaid Cards

Should I Buy A Gift Card Or Prepaid Card? Gift Cards Or Prepaid Cards

The pros and cons of sending or giving gift cards, prepaid cards and money are all covered in this article. The subject is approached from the perspective of a gift-giver deciding whether to send a prepaid card or a gift card. Primarily, this article deals with gift cards and prepaid cards. This article only considers the idea of sending money as more of an afterthought. Since prepaid cards are very similar to checking account debit cards, I have also included prepaid phone cards in order to broaden the scope of our prepaid cards discussion.

What Are Prepaid Cards And How Do They Work?

A prepaid card is similar to a debit card that you get with your checking account, but a prepaid card is rarely linked to a bank account. If it is linked to a bank account, then it is linked via a third party. For example, if you use the PayPal prepaid card then your card is linked to your PayPal account, and your PayPal account may be linked to your bank account.

You have to load money onto a prepaid card. If you are sending a gift through the post, then a prepaid card allows you to do that. Even if a thief tampers with the mail, the thief will not have the pin number and/or activation code. By comparison, a security-free gift card may be stolen, and money in the post may be targeted for theft and/or encourage theft. Prepaid cards do not have the protections that debit cards do, which is why they are not recommended for long-term use.

A shelf full of gift cards

Why Not Just Give Money Instead Of Gift Cards And Prepaid Cards?

A common criticism of sending gift cards and prepaid cards is that they are accepted in a limited number of places or stores. Whereas, money is accepted almost everywhere. As you will read in this article, there are many good reasons why you should send gift cards and prepaid cards.

The strongest reason for sending gift cards or prepaid cards is because there are many times when money is simply not appropriate. Let us push aside the fact that sending money in the post is a terrible idea and instead assume that you have handed over the gift card or prepaid card. The sender may wish to limit what the recipient receives as a gift.

person using a prepaid card

For example, if you give a child some money, then the money may be taken by his or her parents or other school kids. Give a teen some money, and it may be spent on smokes, drugs or alcohol. Give it to an adult, and he or she may spend the money on bills. At least with a gift card, and to a lesser extent with a prepaid card, the giver is able to maintain some sort of control over how the gift is spent.

Obviously, there are ways around this control, such as selling the gift card or drawing funds from the prepaid card, but the incentive to spend gift cards and prepaid cards on goods and services within certain limitations are clear and convenient. Gift cards and prepaid cards are loaded with a certain amount of expectation, and many recipients will acquiesce to those expectations as a show of gratitude.

Gift Cards And Prepaid Cards Are A Little Safer In The Mail

Send money in the post and wave goodbye to it. Your mail passes through so many hands that it is impossible to track a thief, which is why the theft of money from the mail is so common. I am not saying that postal workers steal. I am saying that a letter passes through so many hands in its travels that an opportunistic thief knows that he or she will never be caught.

A gift card with the recipient’s name on it, or a prepaid card that has to be activated over the phone, is slightly safer than when you send money. In addition, postal thieves are more interested in locating cash than random plastic cards in the mail.

You Can Track The Mail Thief With Some Gift And Prepaid Cards

If a thief steals your gift card and you have its numbers and a receipt, then the police may be able to track where the card is spent and who spent it. The same may be true for prepaid cards. The only downside is that you will not get your money back, and most thieves will sell stolen cards to innocent people, so the people that spend the money are not the ones that did the thieving.

Cat trying to steal treats

Gift Cards Help To Ensure That The Recipient Buys An Object Or Service

If you want to give your recipient a present, but you do not know what to buy, then you can send a gift card. At least it partially guarantees that the recipient buys an object so he or she has something to show for it at the end.

Prepaid Phone Cards Can Be Both Helpful And Allow The Recipient To Save Money

They are commonly given to students who are living on a campus in another state. Phone cards allow students to use landlines for less, or they allow students to buy phone service packages that allow them to call home whenever they wish. Long distance lovers from overseas may send each other phone cards so they may talk on the phone for hours.

Gift Cards Have A More Personal Feel

Sending money is very impersonal. Some people really enjoy getting money as a present, but if it is the thought that counts–then money doesn’t require much thought. A gift card shows that you put some thought or effort into your gift. Such a notion is true–even if it is only marginally more thought than if you had sent money.

Gift Cards Are More Personal Than Money Or Prepaid Cards – But Not By Very Much

Send a prepaid card, and the recipient may appreciate it if there is already a pre-determined use or reason. Send a gift card after asking which store your recipient loves, and it shows that you put a little thought into your present. However, some people are not bowled over by receiving a gift card, especially if there is a short expiry date.

One way to get around this is to discuss sending a gift card in advance and finding out which items your recipient needs. For example, if your recipient wants a kettle, then you can send a gift card for that person’s favorite store, and then that person may pick his or her own kettle. You may also win a few points if your gift card may also be used for online purchases because it will mean the recipient can start spending right away.

gift cards and prepaid cards on a display

Prepaid Cards Are Possibly More Impersonal Than Money

If you are planning to send somebody a prepaid card, then consider telling him or her in advance. Since it may be considered more impersonal than sending money, you could tell the recipient that you are sending a prepaid card because it is safer than sending cash through the mail.

Gift Cards Ensure The Recipient Has Something To Show For The Gift – But Often Encourage Further Spending

It is true that the person receiving the gift card will probably end up with an item to show for it at the end, but do remember that gift cards encourage further spending. For example, a person with a gift card for $25 is probably going to see something he or she likes for $30 or $40. If the person you are sending the gift card to is a compulsive shopper, then consider an alternative gift.

Prepaid Cards Are More Flexible Than Gift Cards

If you buy or order a prepaid card that simply holds money in a digital account, then that card will be more flexible than a gift card. A prepaid card may be spent on anything from a living room set to gas. A gift card has a very specific use, which makes it rather inflexible when compared to a prepaid card with money on it.

Prepaid Cards Are Reloadable Where Many Gift Cards Are Not

Some prepaid cards have incentive offers. For example, prepaid phone cards sometimes allow users to buy bundle deals for their pay-as-you-go mobile phones. A bundle deal may offer X amount of texts, phone data, and call time if a user spends a $25 from a prepaid card. In addition, you may be able to top your phone card or your prepaid up again so that you may continue to use it.

Prepaid Cards May Be Used As Budgeting Tools

Once your recipient has spent the money on the prepaid card, there is no law that says he or she has to cancel the account. The recipient of the card may start using the account as a budgeting tool. Maybe he or she loads it up with this month’s food budget to help stop him or her overspending on food and snacks.

Transactions Charges And Other Fees Are Often Added To Prepaid Cards

There may be fees if you do not use your prepaid card, or if you conduct too many online transactions with your prepaid card. There may even be a maintenance fee on the card that you were previously unaware of. If you are sending a gift, do not burden the other person with fees and charges; especially if they are unexpected fees and charges.

Gift Cards And Prepaid Cards Allow You To Track A Thief – But They Offer Less Protection Than A Debit Card Or Credit Card

Gift cards and prepaid cards are covered by theft laws, but they do not have the added protection that credit and debit cards have. Some gift cards and prepaid cards may have some form of insurance where you may recoup some of your lost money, but there is no guarantee.

Some Prepaid Credit Cards Are Not Accepted Where Debit Cards Are

Prepaid cards may be MasterCards instead of Visa cards. There are still some stores (both online and offline) that do not accept MasterCards. There are also some systems that accept debit cards and do not accept prepaid cards.

Some Prepaid Cards Are Not Accepted Where Gift Cards Are

Visa and mastercard not acceptedAs mentioned in the section just above, there are some online and offline stores that will not accept prepaid cards. Yet, the same stores may accept a variety of gift cards.

Stores may not accept prepaid cards simply because they are prepaid cards and the company has rules against accepting them. Some companies do not accept prepaid cards because some of the issuing companies are unreliable, and some prepaid cards are easy to forge. There is also a fear that some prepaid cards are used to launder money, and some stores don’t want their fingerprints all over such a practice.

Some stores will not accept your prepaid card because it was issued by MasterCard, which may be a type of card the store does not accept. Typically, if the store doesn’t accept credit cards, then there is a chance they will not accept your MasterCard prepaid card.

Cancelling Prepaid Cards Can Be A Hassle

fed up lady at computer hassle defined

Usually, cancelling a prepaid card account takes little more than a phone call, an email, filling out an online form, or deactivating the account online. However, there are some prepaid card companies that are hungry for business and will make it difficult for you or your recipient to cancel.

Gift Cards Can Expire Which Is A Little Unfair

Prepaid cards expire too, but they often have years on them just like your debit card does. Gift cards and prepaid cards should have expiry dates on them. When a gift card expires, it means the card is gone forever. However, when a prepaid card expires, it usually means you simply need to order a new card.

Gift Cards And Prepaid Cards Do Not Allow You To Get Into Debt

Even debit cards where you have opted out of overdraft protection may still allow you to get into debt by overdrawing, but a prepaid card will not allow you to overdraw. Prepaid cards will only allow you to spend the money you load into the account.

You May Spend Money That You Have Converted From Another Currency

Spend Money

There are some prepaid card companies that allow you to load up your account with one currency and then convert it into another when you spend the money. There are also some online accounts that allow you to receive a foreign currency, convert it, and then spend it on your card.

Gift Cards And Prepaid Cards Limit The Amount The Recipient Spends And How Much May Be Stolen

They limit how much may be spent because they have spending limits. Gift cards and prepaid cards also limit how much is stolen and reduce the chances of higher amounts being stolen because they have less money on them than what your debit or credit cards may have on them.

Gift Cards Take Numerous Formats

Gift cards may take the form of plastic cards, paper cards, online vouchers, codes, barcodes and QR codes. Since Internet shopping is so popular, it is not uncommon for people to buy gift cards and then send the voucher code to the recipient via email so that he or she may spend the gift card money online.

Gift Cards May Come With Built-In Discounts

discount pusher

Unless you are sending a present (gift card) through the post, there may be little point in buying a gift card. Unless you are adamant that the recipient buys an object rather than carelessly spend the money, there may be little point in buying a gift card. Retailers know this, so they add an extra incentive by offering discount packages with their gift cards. That way, the spender is motivated to both use the card and buy certain items at the same time.

Conclusion – Gift Cards And Prepaid Cards Suit Some Circumstances

Gift cards and prepaid cards are not a staple mechanism for most people. They are not something that somebody may buy frequently or daily. In most cases, they are purchased because they fit a circumstance. The most common reason is that somebody wishes to buy a gift for another person and doesn’t want to give hard cash. Another common reason is that the cards offer some sort of discount or benefit. If you are looking to buy a gift and you are stuck for ideas, then consider gift cards and prepaid cards, especially now that you know their inherent advantages and disadvantages.

About The Author

Ash The Great

After a varied career in different industries from the hospitality industry to the financial consultancy industry, Ash now spends his days working as a professional writer.


  1. William Peterson

    Is it possible to give a student a prepaid card to stop her from getting a credit card?

    • Ash The Great

      Instead of wiring your child some cash every month into his or her bank account, you can load it into a prepaid card. The extra income should help stop a level-headed student from resorting to a credit card. In addition, adding money into her prepaid card will not help improve her credit rating, which will make it a little harder for her to get a credit card.

      Sadly, if she is in college, unless she is attending a conservative or religious college, she is probably surrounded by parasitic and vulture companies that will give her a credit card even if she has no banking history or a poor credit rating. Such companies see leftists as a soft touch to the point where they hire college students to offer freshmen credit cards on their first day of college.

      I have even seen credit card companies set up booths for students in colleges where students can sign up for a credit card in their first day. Doesn’t that just grind your gears? Students are already setting themselves up for enough student debt that they could have otherwise spent on buying a house, and some colleges think it is okay for students to get into even more debt.

      college credit card booth

      The best defense is to help her learn the value of saving. Forget trying to tell her not to spend and not to use credit cards because it is like trying to tell a kid to turn down what she thinks is free money. Instead, help her appreciate the value of saving, and point out that if she can save money while struggling in college, then imagine how much she will be able to save when she is a fully employed adult.


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