Credit Cards vs. Debit Cards vs. Pre-paid Cards: What’s the Difference?

My wallet has the most random things ever. It includes a credit card, forgotten business cards, a flash drive, a gift card I got on my birthday, some coins, cash (sometimes lol), and an embarrassing baby photo. Hang in there. I am not writing a “What’s in my wallet” post. I am writing about the difference between credit cards, debit cards, and pre-paid cards.

It is hard to distinguish the three; they all look the same: a 16-digit number, the name of the cardholder, and a card network logo (Visa, MasterCard, etc.) Yet, each plastic card has a different function.

Imagine that you are buying a new white t-shirt. There are three payment options to cover the polo’s price (aside from paying in cash). Let’s dive right in.

💳 Debit Card: A Tie-up of your Bank Account

Using a debit card means that you pull money out of your balance. If you bought the white t-shirt for 300 EGP, the amount of money will be withdrawn right away. You are spending your own money.

The bright side of debit cards is that you don’t need to carry cash in your wallet. The plastic cards are directly connected to your bank account. Yet, you can only spend the money you own at the very moment of the purchase.

💳 Credit Card: A Short-term Loan

A credit card is simply an instant way to get a short-term loan from your bank. Let’s get back to the white t-shirt. You found a good fit for 500 EGP, but you don’t have enough cash. So, you decide to use your credit card. At this instant, while the Point of Sale (POS) is processing the transaction, the card issuer (aka the bank) covers the purchase. Yet, you will eventually have to pay back the 500 EGP.

The bank will set a due date for the payment. You will either pay in full and meet the “deadline” or pay a minimum amount over time. Paying in full is the best option to avoid interest. For example, if you bought the polo for 500 EGP and you decide to pay the minimum, then you will owe the bank an extra 50 EGP of interest.'

Sounds good, right? *Fills out papers to request a credit card* Well, don’t sign the application yet. You must use credit cards cautiously, as your payment history will directly affect your credit score. The latter is a three-digit number that rates how risky it would be to lend you money. So, you have to pay the minimum by the indicated due date to apply for any loan in the future.

One last thing, your credit card has a credit limit that you can’t exceed. The bank will determine the maximum amount of money that you can spend, based on your income, debts, and other factors. So, utilize the “buy now, pay later” card wisely!

Pre-paid Card (aka the Nexta Card): Loading Money 🔥

A pre-paid card is a debit card that you “load” with money. It is not tied to your bank balance. You place money on the card in advance. So, you can only spend the money “loaded onto the card.” It is paid beforehand, hence the name.

The Nexta card will change the “pre-paid” game. It will allow you to connect your existing cards, withdraw cash from any ATM in the world, and there is no interest. Plus, it is a secure option, since the card is not linked to your checking account. You can easily top up your Nexta card through your nearby ATM, Fawry, or your mobile wallet.

Now, you know your plastic cards. The next time you buy a white t-shirt, look closely at your cards and make a choice.

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