Three cards, three different principles

Debit cards, credit cards and prepaid cards often look identical in an online shop's checkout form: one field for the card number, one for the expiry date and one for the security code. Behind them, though, the three card types work on quite different principles, which above all affect when exactly your money is actually taken.

For a single order, this difference often hardly matters, but it is quite relevant for keeping control of your spending and for dealing with a problem after a purchase.

Debit card: charged directly to your own account

A debit card is linked directly to your current or checking account. A payment is taken from your available balance promptly, usually within a few days of the order. If there is not enough money in the account, the payment may be declined or the account may go overdrawn, depending on the arrangement you have with your bank. Spending is therefore closely tied to the money you actually have, without an extra credit line in between.

Credit card: paying on credit and settling up later

With a credit card, the card issuer first pays the amount on your behalf. You are actually charged in one go, usually once a month through a statement covering all purchases made during that period. There is therefore a certain gap between the purchase and your own payment to the card issuer, during which you have not yet had to find the money yourself. Credit cards also often offer an established way to get a chargeback if an order does not arrive as agreed.

Prepaid card: only as much as you loaded beforehand

A prepaid card works the other way round from a credit card: you first load money onto the card, and only that balance is available for payments. Once it is used up, any further payment is simply declined, regardless of how much money is in a linked bank account or whether there is one at all. That makes prepaid cards handy for a fixed online budget, or for situations where you do not want a permanent link between the card and your main account.

Security and buyer protection compared

The three card types also differ in how easily a wrong or fraudulent charge can be reversed. With a credit card, a chargeback through the card issuer is an established route if goods you ordered do not arrive or a charge was not authorised. With a debit card, the exact process depends more on your own bank, and with a prepaid card the maximum loss is capped from the outset by the limited balance, although a chargeback is not always as easy to get there. What buyer protection when shopping online covers in general also differs depending on the card network provider, and consumer protection rules for card payments vary from country to country.

Currency conversion and foreign fees by card type

If you order from a shop that charges in a different currency, the fees each card charges for conversion also come into play. These fees depend less on the card type than on the individual bank and card provider. How exchange rates and card fees abroad work together is worth looking at more closely before a larger order from abroad, whichever card type you otherwise choose.

Virtual card numbers as an extra layer of security

Some banks and card providers offer a virtual card number in addition to the physical card, which is only visible for online shopping and can be blocked independently of the physical card, sometimes even limited to a single shop or a single order. If the virtual number falls into the wrong hands at an online retailer, the physical card is not affected and keeps working, while only the virtual number is blocked and replaced with a new one. This principle can be combined with a credit card as well as with some debit or prepaid solutions, but it is not automatically included with every provider.

Which card type suits which situation

• For a fixed monthly online budget, a prepaid card is a good fit, because going over it is technically impossible.
• For regular orders from abroad or from shops you do not know, a credit card usually offers the more established options for a chargeback.
• For everyday purchases directly linked to your account balance, a debit card works well, as long as you keep an eye on whether there is enough money in the account.

An example of keeping to a budget

Say you set aside exactly 150 euros for online shopping for one month. If you load a prepaid card with exactly those 150 euros at the start of the month, no higher amount can technically be charged, even if a shop gets the total wrong when you order. If the same incorrect charge goes through a debit card with an account balance of 620 euros, it simply goes through at first, as long as there is enough money available, and you would have to sort out the correction with your bank afterwards. On a credit card with a limit of 2,000 euros, such an error would be even less likely to be caught at the card limit, because there is plenty of room left.

Frequently asked questions

Which card is best for limiting your spending?

A prepaid card, because it only makes the balance you loaded beforehand available and technically does not allow any payment beyond that.

Why do some shops prefer credit cards to debit cards?

For the retailer, credit card payments often come with established, standardised procedures for chargebacks, which for some shops makes the handling more predictable than with other card types.

Is a prepaid card tied to a bank account?

Not necessarily. Some prepaid cards can be topped up and used independently of an existing current or checking account, while others are linked to an account from which the balance is topped up.

What happens with a debit card if there is not enough money in the account?

Depending on the bank, the payment is either declined or the account goes overdrawn, depending on your individual account arrangement. That is different from a prepaid card, where going overdrawn is ruled out from the start.

Is a virtual card number worth having in addition to your normal card?

If your bank offers one, it is a simple extra layer of protection for online shopping, because it can be blocked separately from the physical card. It is not essential; it simply adds to the chargeback options you already have with a credit or debit card.