Credit Card vs Prepaid Debit Card: The Best Choice

In this article, we will analyze my opinion and some research regarding the use of a Credit Card vs Prepaid Debit Card: The Best Choice

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One bank account = One business

To begin with, you must keep in mind that banks create bank cards with the aim of selling a product. Let's be clear! No bank wants to sell a card that will not be profitable for them.

The main bank account commissions

When a customer wants to open a bank account, there are some fees to analyze, for example:

Monthly card maintenance fee
Annual bank account maintenance fee
Exchange rate markup (currency transfer)
Cash withdrawal fees (ATM withdrawal)
Card payment abroad

Ideally, you would like to find a bank card without bank fees. But this is rarely possible because banks want to make money with their banking services. That's normal!

On the other hand, you must understand that the majority of bank accounts will offer you 2 bank card systems. That is to say, credit or debit.

The difference between a credit card and a debit card (pre-paid)

➡️ In reality, we can summarize all bank cards in 2 withdrawal systems:

Withdrawal on credit
Debit withdrawal (pre-paid)

In general, with a credit card it is possible to continue spending, exceed the initial balance and have a debt with your bank, while with a prepaid card it is not possible to be below 0.

I am lucky to have found a video on YouTube that summarizes the difference between a credit card and a debit card in 2 minutes. The video is Canadian but it is applicable in any country.

Once you watch the video, you will understand that a credit or debit card (Pre-Paid), actually seeks 2 different users.

Debit card (Pre-Paid)

The debit card (pre-paid) is a classic bank card. The customer adds money. Spend his money. And as soon as the balance is at 0, the card is unusable.

The bank only earns money from commissions relating to account management and payments.

👉 Therefore, we, the customers, we just have to pay attention to the commissions when making payments, withdrawing money or commissions related to account maintenance.

A prepaid bank card, probably the type of card I recommend 👍

You will understand by reading the credit card 😊

Credit card

When you use a credit card. It's a bit like playing with fire 🔥

Commissions are similar to pre-paid debit cards. But you have an additional benefit and commission 😯

👉 You have the possibility to withdraw more money compared to what you have added. This money lent by your bank, and you have interest if you don't pay your debts on time 👎

In reality, the longer you wait, The more negative interest you have, the more money you will owe to the bank.. This is called negative compound interest. 😒

I think you understood the problem 😑.

With a credit card, you have similar fees to a debit card. But with a risk of getting into additional debt ‼

So if you want a visual summary of the problem of owning a credit card, I recommend watching episode 2 of the show “money in a nutshell” on Netflix.

Super interesting and it only takes 20 minutes!

⚠️ Beware of commissions

⚠️ You should not underestimate the commissions of a bank card. It doesn't matter whether the payment card is a Credit or Debit card. In my case, changing my debit card allowed me ofsave around 400 CHF per year.

All I did was…. Change a piece of plastic (i.e. the bank card) when making my payments 😉.

What are the main bank card brands?

In reality, in Europe, in the majority of cases, there are mainly 4 cards offered which come from 2 payment networks:

Prepaid Visa Card
Prepaid Mastercard Card

Then there are credit cards:

Visa credit card
Mastercard credit card

Not forgetting the Gold versions:

There are also gold or metal version credit cards.

In reality, these are bank cards usually with high bank fees, because these bank cards also have insurance included, such as repatriation or trip cancellation.

Note that there is no real best bank card, everything will depend on the customer's needs and the commissions that the bank account will charge to obtain a bank card.

Example of negative interest

I searched the internet for the commissions of some credit cards.

➡️ In reality, when banks lend money, the debt commission turns towards 11% according to the bank¹ 😶

We could say that 11% is not much. Indeed, for 100 CHF for example, it is “only” 11 CHF of debt after 1 month.

Except that compound interest accumulates very quickly 😯

👉 Here is an example with a debt of 1,000 CHF

	1000 CHF of debts	Interests
1st year	1'110	110
2nd year	1,232	232
3rd year	1,367	367
5th year	1,685	685
10th year	2,839	1839

And yes, we see that we quickly reach high debts. In reality, it’s the opposite path of the frugalist!

Therefore, regarding credit cards, it is very simple, you must avoid them at all costs!

Proposals for debit banks (Pre-paid)

Nowadays there are good Swiss bank accounts with pre-paid debit cards. With decent commissions. 😉

I am thinking for example of:

Neon red version
Yuh
We (Top pack)

I wrote an article for each account offered. If you want to read them, go to my page Saving / Frugalism.

Conclusion

In conclusion, I advise to always favor pre-paid debit cards! It is emotionally easier not to exceed 0 CHF in your bank balance.

note that The choice of a bank card, credit or debit (pre-paid), is very important for our financial independence 🧐

👉 Bank commissions must always be as lean as possible❗It is our responsibility to analyze the commissions.

➡️ Credit cards will increase your chances of getting into debt. Once in debt, even with small amounts, it will be more and more difficult to get out of it! Because you're going to lose a lot of money with negative compound interest.

It should not be forgotten that with the exception of some investment debts. Almost all debt is a barrier to our financial freedom.

Credit Card vs Prepaid Debit Card: The Best Choice

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