What is the difference between a Debit Card and a Prepay Card (like Revolut)?
In: Economics
They’re largely the same. They both work under the premise that you have a fixed amount of money stored with a financial institution that is taken out when transactions are executed. The big differences are how the money is put in and how the transactions are processed.
In debit cards you have money in a traditional bank, typically a checking account, and you execute a PIN based transaction that uses a separate network than the traditional Visa/Mastercard processing system. Money is removed from your account sooner and the merchant pays a smaller fee to the card processingnetwork.
In prepaid credit cards you deposit money into a financial institution, perhaps differently than you would a bank. Point of sale activation cards (the kind you see at grocery stores) are a common way to do this. You then have a credit line equal to your balance. You can execute credit transactions based on the card’s affiliation (Visa/Mastercard/American Express). The money is removed from your balance after a slightly longer period and the merchant pays a larger card processing fee.
Fraud protection is typically higher with credit transactions, but having an account with a bank processing debit transactions may offer a smoother experience than a company that doesn’t even need your name.
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