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Gift Card vs. Prepaid Debit Card: What’s the Better Gift?
Gift cards are the clear winner for a straightforward gift of cash. Prepaid debit cards are more like bank accounts.
Spencer Tierney is a consumer banking writer at NerdWallet. He has covered personal finance since 2013, with a focus on certificates of deposit and other banking-related topics. His work has been featured by The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among others. He is based in Oakland, California.
Sara Clarke is a former Banking editor at NerdWallet. She has been an editor and project manager in newsrooms for two decades, most recently at U.S. News & World Report. She managed projects such as the U.S. News education rankings and the Best States rankings. Sara has appeared on SiriusXM Business Radio and iHeartMedia’s WHO Newsradio and has been quoted in The Salt Lake Tribune, The St. Paul (Minnesota) Pioneer Press and other outlets. She is based near Washington, D.C.
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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.
4.50%SoFi members with Direct Deposit or $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either Direct Deposit or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi members with direct deposit are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
4.50%4.50% APY for $0 to <$250k; 4.80% APY for $250k+ balance
Min. balance for APY
$0
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
5.50%*Current promotional rate; annual percentage yield (variable) is 5.50% as of 4/2/24, plus a .50% boost available as a special offer with qualifying deposit. Terms apply; if the base APY increases or decreases, you’ll get the .75% boost on the updated rate. Cash Reserve is only available to clients of Betterment LLC, which is not a bank; cash transfers to program banks conducted through clients’ brokerage accounts at Betterment Securities.
Min. balance for APY
$0
CDs (certificates of deposit) are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts.
CDs (certificates of deposit) are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts.
Let’s start with how they’re similar: 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. You might see both types of cards in the same section of a store such as Walgreens, so be sure you know which one you’re picking up.
The main difference between a gift card and prepaid debit card is that a gift card is a one-time spending card, and a prepaid debit card is a reloadable payment option that has most features and fees that a checking account and a linked debit card have.
Gift cards have one purpose: to buy goods at a dedicated store brand or at any store that accepts a payment network such as Visa, Mastercard or American Express. They don’t allow cash withdrawals, and most aren't reloadable.
Prepaid debit cards have many functions: make purchases; withdraw cash at ATMs; banks or certain retail stores; and 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've traditionally been popular for curbing overspending or helping children and others new to banking develop helpful money habits, but in recent years there have been more banks without overdraft fees (a common cost when overspending) as well as budgeting apps to help track spending.
4.50%SoFi members with Direct Deposit or $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either Direct Deposit or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi members with direct deposit are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 8/27/2024. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
4.50%4.50% APY for $0 to <$250k; 4.80% APY for $250k+ balance
Min. balance for APY
$0
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
5.50%*Current promotional rate; annual percentage yield (variable) is 5.50% as of 4/2/24, plus a .50% boost available as a special offer with qualifying deposit. Terms apply; if the base APY increases or decreases, you’ll get the .75% boost on the updated rate. Cash Reserve is only available to clients of Betterment LLC, which is not a bank; cash transfers to program banks conducted through clients’ brokerage accounts at Betterment Securities.
Min. balance for APY
$0
CDs (certificates of deposit) are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts.
CDs (certificates of deposit) are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts.
Gift cards are true to their name: gifts. Their simplicity is partly what makes them better to give. But there’s another reason: Prepaid debit cards typically have monthly fees like checking accounts do and the fees, often $5 to $10, can add up to $120 per year. There may be other fees as well, such as transaction or inactivity fees.
Gift cards are the better choice, but they’re not all equally good deals.
General-use gift cards, such as those from Visa and Mastercard, tend to have one upfront fee, often called a purchase or activation fee, which the gift giver would pay. The fee might be $2.95 to $5.95, depending on the amount added to the card, based on a sampling of gift card websites. But there aren’t usually other fees after purchase.
There are exceptions, though. A bank may offer general-use gift cards that have replacement card fees or inactivity fees, which may get charged monthly after a year of no card use.
You can get around most, if not all, fees by buying a specific store brand gift card. In general,
understand the terms and fees on a gift card before you buy it so that your holiday gift brings joy with no fees attached.
