Subscribe

Gift card vs. prepaid debit card: Which makes a better gift?

Prepaid debit cards can be a useful budgeting tool, but traditional gift cards are easier to use. 

  • close
    Sears gift cards inside a department store in Garden City, N.Y.
    Shannon Stapleton/Reuters/File
    View Caption
  • About video ads
    View Caption
of

Cash is an easy gift option, but what form it should take is another question.

Putting bills into an envelope may work, but it’s not ideal: There’s no way to recover cash if it gets lost or stolen. Plus, it’s easy to forget cash was a gift once it’s tucked into a wallet.

Storing cash on plastic cards is better, provided you choose wisely between gift cards and prepaid debit cards. Here’s what to know.

Gift cards vs. prepaid debit cards

Both are prepaid cards, meaning you put money on the card in advance for spending at physical and online stores. They also offer protections against loss if you register them in your name. They work differently, though. Gift cards are only spending cards, so they don’t allow cash withdrawals, and most aren’t reloadable.

Prepaid debit cards, on the other hand, let you make purchases but also withdraw cash at ATMs, banks or certain retail stores, as well as use web features such as bill pay. They’re also reloadable.

Because of their flexibility, prepaid debit cards can serve as budgeting tools or even as replacements for checking accounts. They’re popular for curbing overspending, which teens or young adults may struggle with.

Winner: Gift cards

Prepaid debit cards have more uses than gift cards, but they’re not ideal as gifts. The biggest reason is cost. Many have monthly fees that add up to between $12 and $120 per year, and there may be other fees as well.

Gift cards are the better choice, but they’re not all equally good deals.

“Generic gift cards like those from Visa or American Express allow recipients to buy at any store that accepts that card network, but they may come with activation fees that the gift giver will have to pay,” says Courtney Jespersen, retail expert at NerdWallet.

If you buy a Visa or MasterCard gift card from a bank, there might not be an activation fee, but there may be fees for card replacement and for not using funds within a year.

“Shoppers can get around most, if not all, fees by buying a specific gift card directly from a retailer or restaurant instead,” Jespersen says.

“The bottom line is that traditional [retail] gift cards are easier to use and a better value,” says Lauren Saunders, associate director of the National Consumer Law Center in Washington, D.C.

Understand the terms and any fees on a gift card before you buy it so that your holiday gift brings joy with no fees attached.

Spencer Tierney is a staff writer at NerdWallet, a personal finance website. Email: spencer@nerdwallet.com. Twitter: @SpencerNerd.

This article first appeared in NerdWallet

The Christian Science Monitor has assembled a diverse group of the best personal finance bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
FREE Newsletters
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK