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Gift Cards vs Prepaid Cards: Which One Makes a Better Present?

The difference between a gift card and a prepaid card looks minimal but is miles apart. Which one makes a better present-- time to decide.

Gift Cards
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10 Min read
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Last Updated on
May 5, 2021

The new era of gifting is no longer about assuming what the recipient would love to have as a gift. On the contrary, it has everything to do about it. This paradoxical maze comes with the newfound freedom of choice which is a prominent gift option. Be it a $50 gift card from your favorite retail store or something as specific as a subscription to an OTT platform, gifting is back to its heritage values, where it’s the thought that counts. Now gift cards vs prepaid cards? That’s simply a part of the debate.

Prepaid Cards & Gift Cards: The battle of versatile gifting options

When it comes to a dynamic gift that can be used anywhere and is as liquid as cash, these two options are the ones that come into our minds. Gift cards and prepaid cards have everything that it takes to be personalized gifting instruments with a thought, a nice message, and the purchasing power to top it off. 

Would a prepaid card feel too salesy when gifted to a friend because it has a fee attached to it? What if the gift card is worth too less—even as a gift? Which would be a better option? While gift cards are more inclined towards a use-till-it-dries-out approach, prepaid cards are nifty debit cards, in which balances can be refilled and the card can be used for a long time. While some think it’s about perspective, it’s more about the functionality.

Before moving on to which one’s a better gift, let’s understand their utilities for a clear description.

What is a Gift Card?

A plastic/virtual card fuelled up with certain amounts of currency to be spent on a single store or a chain of stores, a gift card lives up to its name. To put it into perspective, it’s your aunt’s go-to gift for Christmas—statistically. 76% of adults purchased at least one gift card for the holiday season. These gift cards are mostly closed-loop, and they can only be cash in at a store or a chain of stores.

Check out the best gift card options for your loved ones here>>

Advantages of Gift Cards

Gift cards are an exemplary substitute mode of payment in case you don’t want to pay upfront in cash or with a credit card. Besides the fact that they make a handsome gift for holidays and any other special occasions, gift cards can curb the problem of overspending and avoid bank overdrafts. They are easy to use and are now a conventionally acceptable mode of gifting. The advantages of gift cards sound rather amazing.

Disadvantages of Gift Cards

In most scenarios, it’s not possible to make a purchase exactly worth the gift card’s value. There would either be an overdraft wherein the person would have to pay via cash or card, or the remainder money ends up as waste. While many gift cards give the option of reloading it with more purchasing power, it’s not the case with closed-loop gift cards. As it is a physical piece of plastic or a code sent over email, there’s always a possibility of it being lost or stolen. That’s why major Disadvantages of Gift Cards tend to address their insecurities.

What is a Prepaid Card?

Technically known as debit cards, prepaid cards are an amazing escapade from the web of credit card debt. Perspective time: This is an amazing gift for a young adult/teenager to give them the purchasing power with responsibility. A nifty instrument to curb the epidemic of overspending, prepaid cards are loaded with money and the card user can only spend as much as the balance in the prepaid card. Some cards do come with an overdraft balance, and these prepaid cards come with an annual or monthly fee attached to them.

The best-prepaid card options for gifting>>

Advantages of Prepaid Cards

There’s no need for a bank account to own a prepaid card. These cards are free from credit checks or inquiries by credit unions and they aren’t a part of the user’s banking history—except the transactions where they bought the card/reloaded it. For users who don’t have access to credit cards or bank accounts, prepaid cards are a great way to learn finance management.

Disadvantages of Prepaid Cards

There’s a fee involved in prepaid cards and that is not just a nominal fee. Many prepaid cards, when gifted, don’t have an applicable fee, but if the user wants to use it after exhausting the balance, the prepaid card fee will be charged for services like initial setup, monthly maintenance, reloading the prepaid card, using an ATM, and more. Of course, the disadvantages of prepaid cards exemplify its financial fallacies.

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Weighing up the Utilities

The utility quotient of both gift cards and prepaid cards are unmatched and meanwhile they’re often used interchangeably, the statistics tell a different story.

When it comes to gift cards, their usage is determined by a variety of factors, namely:

  • Vouchers being a ‘gifting’ commodity and being presented as a token of gratitude on an occasion.
  • Gift cards substituting as an incentive, bonus, or a pat on the back for a job well done.
  • And the recipient cashing it in to redeem the benefits from a certain gift card.
  • As the gift card market is booming at an immeasurable rate, the utility is only set to increase. Many gift card users even procure vouchers for themselves as it’s an easier thing to do and helps in budgeting.
  • Coming to prepaid cards, the utility is already pretty much existent and in South-East Asian countries, it’s a crucial instrument to stay in the bounds of one’s spending and escaping the debt trap. 
  • With a reduced risk of overspending, prepaid cards are used as first lesson to finance for youngsters, making them an educative instrument.
  • Its utility as a cash substitute makes the prepaid card safer and secure to carry and operate.

Prepaid cards are now being used in large proportions by countries fully dependent on credit and cash for their own financial wellness. With the usage set to increase further due to its practicality, prepaid cards are an amazing gift idea.

More people are stuffing prepaid cards in their wallets (Statista)

Gift Cards vs Prepaid Cards: What’s the perfect ‘one-size-fits-all’ Gift?

Now that we are well aware of the difference between gift card and prepaid card, let’s compare the traits of gift cards and prepaid cards on the factors that matter the most to a holder. While both of them are locked abroad with a set value of money, here are some distinctions in their utility.

Flexibility

Sure, gift cards are the most versatile gift that can be as something like a $50 Amazon gift card can set the recipient up nice and easy for anything. But certain factors make gift cards less flexible of the two. For instance, they can’t be spent anywhere other than where they’re supposed to be used for and are tied to a single chain.

When it comes to prepaid cards, they are as good as free money. Cash them out at ATMs, swipe them at a POS checkout, or simply use them when transacting online. This gives an edge to prepaid cards when it comes to flexibility. However, presenting a gift voucher to a recipient from where they can either use it for gift cards or cash them on prepaid cards? Now that’s a real flexible gift.

With Xoxoday Plum, send out Xoxo Points to your giftee and present them the freedom of choice—wherein they can either use those points of a gift card or a prepaid card.

Security

Technically, a prepaid card is much more secure because the user has to enter a PIN to transact and gets a record of all the transactions they’ve done so far. But that’s because gift cards are supposed to be easily accessible. The gifte can access all the gift card balances as soon as they enter the gift card code in the store platform during checkout or swipe the plastic at brick-and-mortar stores.

In case the card gets lost or stolen, prepaid cards can be instantly blocked from further use via a text or call to the card authority. If a gift card code lands in the wrong hands, however, there’s no way back. Many gift cards come with a two-step-verification, but most simply don’t. In that case, it’s best to send over gift cards virtually via email or through a text message.

Associated Costs

Gift cards are the out and out winner here, considering the fact that they don’t cost the recipient anything at all. The Prepaid card has an option to be used after the balance has run out or not—and in case the user continues using it, there’s an annual fee attached to it. In that way, gift cards are truly no-strings-attached presents.

Explore the Best Gift Card Solution Providers

Gift cards and prepaid cards are deemed to be a substantial commodity in the corporate gifting market. Keeping the difference between gift card and prepaid card aside, it's safe to say that the modern day consumer opts for both of these options according to their own whims. While disadvantages of prepaid cards are as many as that of gift cards, the advantages are more or less the same too, so it boils down to what gift card solution provider do you go for.

For instance, a platform like Xoxoday Plum is the comprehensive digital rewards platform for corporate gift vouchers, prepaid cards, rewards and more. With a catalogue of thousands of brands to choose from, you can weigh up your advantages  of gift cards over prepaid cards or vice versa and take your pick. Want to explore Xoxoday Plum? Check out the Xoxoday Store to window-shop.

Who’s the Clear Winner? The Freedom of Choice!

No matter what you choose as a gift for an occasion, one thing’s for sure—with gift cards and prepaid cards, you are presenting your giftee with the freedom of choice. And when it comes to that, both methods of gifting are clear winners. However, there’s a third one too—which unlocks both gift cards and prepaid cards as a gift to your special ones—and they can choose what they want.

Xoxoday Plum is a huge marketplace with tons of gift vouchers, prepaid cards, perks, and experiences, all of which can be presented as a gift to your beloved. Gift your employees, colleagues, peers, or friends Xoxo Points which they can cash in at the Xoxoday Store. This is a great avenue to ensure that your recipient can choose what suits them best from the choice of gift cards vs prepaid cards.

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