Financial Management

The Difference Between Prepaid Cards, Purchasing Cards, and Credit Cards

17 April 2026

Financial Management

5 mins

Table of contents

Prepaid cards, payment cards, and credit cards can help you manage your business’s finances, but they work in very different ways. So, which one might be more suitable? It all depends on what you and your business need. We’d better start off by explaining what the difference is.

How do prepaid, purchasing, and credit cards work?

Prepaid cards, and purchsaing and credit cards are all financial tools which a business can use to manage spending and expenses, without needing to reimburse employees or approve individual payments. There are some key differences though, which we’ll explain below.

Prepaid cards

A prepaid card is a bit like giving someone a gift card or using a pay-as-you-go phone. You can top it up as and when you need to, and then it most cases you can use it like an ordinary debit card – but spending is limited to the amount you topped it up.

A financial tool that is funded by a business. You (or the business) deposit the funds, and can then only spend them using the card.
You don’t need a bank account to get one
Available without credit checks
Not linked to any line of financial credit
Useful to limit business spending and expenses
You won’t be charged interest, but there will normally some sort of fees involved – such as activation, monthly charges just for having it, or even inactivity fees
Usually don’t offer the same level of financial protection as a credit card
They’re widely accepted, but they won’t be suitable for all transactions – such as pay-at-pump fuel stations

Using credit cards in your business

Credit cards are a bit different because you’re basically borrowing money and then paying it back. The amount you can owe at any given point is usually restricted by a credit limit, and you’ll normally need to at least pay back a minimum amount each month (although you can repay the full balance in one go if you want to).

Anything you don’t pay back is rolled over to the following month, but you’ll be charged interest on the balance you carry forward.

A financial tool funded by a finance institute, such as a bank. The bank agrees you can borrow funds using the card, up to an agreed credit limit.
Usually requires a minimum monthly repayment
You’ll be charged interest on what you borrow
Only available with satisfactory credit checks
Directly linked to a line of financial credit
Useful to access credit when needed
Business credit cards often offer perks, like cash back rewards or purchase protection
The cardholder is usually able to use them anywhere

Purchasing cards

Purchasing cards are very similar to credit cards, but you’ll normally need to repay what you owe at the end of the month rather than rolling it forward.

They’re also far more customisable. The organisation which takes out the card can set all sorts of restrictions and controls. For instance, a business could take out a credit card for an employee, and this could be used anywhere, on anything. Or, they could take out a purchsing card, and control things like a daily/weekly spending limit, retailers it can be used at, or transaction limits.

You can normally set spending and transaction limits for individual cardholders
Spending can even be restricted to approved suppliers
You’ll normally need to set up a direct debit to pay off the balance each month
Fees vary between providers, with some charging for transactions

Spending restrictions and access to credit

Spending on prepaid cards is limited to the amount you make available on the card. That is, you can only spend what you ‘top up’. Credit cards can allow businesses to make use of revolving credit, borrowing funds when they need it and paying it back over a longer period of time. There can be more flexibility with purchasing cards, allowing you to set restrictions at cardholder level.

Security considerations

Prepaid and purchasing cards don’t have the full protection of Section 75 like credit cards do. So, even though spending may be limited (and a prepaid card isn’t linked to a current account), it’s worth bearing in mind that recovering unauthorised spending will be far more difficult.

Section 75

This is from the UK Consumer Credit Act 1974. It makes credit providers and retailers jointly liable for purchases between £100 and £30,000, and allows consumers to claim directly from their credit card provider if goods are faulty, not delivered, or if the company goes bust.

Fees, penalties, and interest

Prepaid cards don’t carry the same financial burden of additional charges because you’re not accessing a line of credit, but there will usually be some sort of fee involved.

Using credits and purchasing cards can incur additional fees in several ways, such as an annual charge for using the card, late payment fees, and interest rates.

Getting something back

Prepaid cards do not offer any form of spending rewards, and it’s rare for purchasing cards. Credit cards often include spending incentives and benefits, such as cashback and redeemable points against travel and shopping.

How do I keep my different payment methods organised?

Keeping your transactions organised means you’re far more likely to reduce the risk of overspending, or running into problems with your cash flow.

Card-issuers will normally give you some sort of reporting function, such as statements and so on, and in most cases, you’ll be able to use bank feeds with a credit or purchasing card. This feels like a good moment to mention Pandle includes bank feeds.

Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible.

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