Gift Card vs Prepaid Card: What’s the Difference?

by Alexander Griffin
Gift Card vs Prepaid Card

Are you struggling to find the right gift to give this year? Want to avoid that awkward moment when someone only pretends to like your gift?

According to the National Retail Federation, the estimated cost of holiday returns was over $100 billion last year. Alternatively, gift card sales are projected to reach $2,000 billion by 2027.

Because let’s face it: holiday shopping can be stressful as it is. Nobody wants to know that all their time and money spent finding the perfect (or not so perfect) gift was in vain.

But doling out cold hard cash can seem a little tactless.

Gift cards and prepaid cards have become a top gift of choice by both givers and receivers. This may leave you wondering, “Gift card vs prepaid card, what’s the better option?”

Below I’ve outlined the differences between the two, so you can give a gift that’s sure to please anyone.

Gift Card vs Prepaid Card

Gift cards and prepaid cards are convenient ways to gift money and are far less likely to go to waste than traditional gifts.

Both are types of stored-value cards which require pre-loading money onto them. And like cash, they allow the receiver the freedom to make purchases at their discretion.

Purchases made with a prepaid card or gift card get deducted from the card’s balance immediately. That means the recipient cannot spend more than the amount that is currently on the card. 

What Is a Prepaid Card?  

A prepaid card operates similarly to credit cards, whereas your “credit limit” is the amount you deposit onto the card.

Financial institutions and credit card companies are the issuers of prepaid cards. You can use them online or in-person, wherever credit cards are accepted, to buy items, pay bills, or withdraw cash from an ATM.

What Is a Gift Card?

Gift cards can be loaded or purchased with a pre-specified amount of money already on them. There are two main types of gift cards available:

Closed-loop gift cards are specific to a single store or merchant whose name or logo you’ll find branded onto the card. If it’s a retail group, the card can sometimes work in any store in their network of retailers.

Open-loop cards are gift cards you can use wherever credit cards are accepted. Many major credit card companies now offer open-loop card options as well.

Gift Card vs Prepaid Debit Card Differences

Despite their similarities, there are many distinguishing factors between the two cards. These include the ability to reuse the card, fees associated with their use, and overall security.


Prepaid cards can be loaded and used indefinitely, as long as they’re topped up. Once you reach the card’s limit, you can reload the card with more funds and repeat the process as many times as you’d like.

Gift cards last until the card runs out of funds. Traditionally, gift cards cannot be reused once the funds run out. However, some companies offer services to reload gift cards for continued use.


Prepaid cards can have a wide range of fees associated with them.

These fees may include activation fees, annual fees, monthly fees, ATM withdrawal fees, and inactivity fees. In addition, customer service fees may also apply, depending on the card provider.

Gift card fees are paid upfront as one-time activation fees. This fee depends on the amount of the gift card and the merchant selling it.

Expiration Dates

Like debit cards, prepaid cards have an expiration date that warrants the replacement of the card. Once this date nears, the cardholder will need to renew the card to receive a renewed expiration date.

Gifts cards also have expiration dates, which tend to be shorter than those of prepaid cards. But, it’s best to read the fine print to learn about the expiration terms, as the length will vary from card to card.


Though prepaid cards don’t link to your bank, they are still susceptible to fraud. However, there are liability policies in place that cover cardholders from fraudulent purchases.

In the case of loss or theft, you’ll only lose the amount on the card. It is essential to check with the individual provider, as each will have specific security policies.

If a gift card is registered, it can be protected in the case of loss or theft. The merchant may even issue a new gift card in its place. If the gift card is not registered, the amount lost is limited to what’s on the card.

Benefits of Gift Cards

Gift cards are available for just about anything these days and can take the pressure off even the best gifters. Especially around the holidays, when going shopping can be akin to stepping into the lion’s den.

As gift cards don’t incur the usage fees related to prepaid cards, the cost of ownership is minute. You won’t have to jump through all the hoops associated with prepaid card fees. 

Giving money as a gift can sometimes feel impersonal.

But gift cards are a great way to add a personal flair. Buying a gift card to the favorite restaurant or store of the person you are gifting can be thoughtful as well as convenient.

Companies like offer gift cards that don’t expire. So the recipient can use them at their leisure and top them up with cash when they need to.

Gift With Style This Year

Gift card vs prepaid card: though both can act as cash equivalents, gift cards feel more personal and you’ll avoid accruing hidden fees.

So skip the holiday madness (and the feigned smiles). Now that you know the difference between a gift card and prepaid card, go add this must-have to your holiday shopping list. 

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