EFTPOS, or debit, cards are quite commonly compared to pre-paid credit cards.  This is because although they both look like credit cards and they are accepted by the same payment system that credit cards are accepted by. In fact they are quite different.

There are also prepaid debit cards, also called “reloadable debit cards”.  These offer many of the advantages of prepaid credit cards, although they technically use a separate payment system.  They are becoming more common in the corporate world, but they are not a common consumer device.

In most cases EFTPOS cards do not have separate accounts in the same way pre-paid cards have them.  This means that any payment that is taken off an EFTPOS card is taken straight off the current account.  This means that fraud is potentially easier as fraudulent transactions will be able to hide among a greater number of current account transactions.

As EFTPOS cards need current accounts it is likely that children or people who have not lived long in Australia will not be able to get an EFTPOS card.  A prepaid credit card is perfectly possible in these circumstances.

EFTPOS cards are less likely to be refused by a shop if they go overdrawn and this may lead to unexpected and unarranged overdrafts which can lead to very high bank penalty charges.  The ability to go into overdraft also means that EFTPOS cards have a greater potential for fraud as unlike a prepaid credit card they do not run out of money as easily.

In cases where fraud is detected an EFTPOS card is less protected than a pre-paid credit card.  The pre-paid credit card comes with the standard credit card protection which means that a consumer is not charged for any loss that can be shown to be due to fraud.  An EFTPOS card holder has to pay the first $50.

Debit cards in almost all cases double up as an ATM card, able to take out cash.  Prepaid credit cards may well be linked to an ATM network, but it is likely to involve higher charges and an unfamiliar PIN number.  They are also likely to incur cash withdrawal charges of around 2% of the withdrawal.  Foreign ATM machines will have similar fees for both credit and EFTPOS cards.

EFTPOS cards are a long term relationship with an institution in the way that a pre-paid credit card is not.  A pre-paid credit card is often seen as more disposable.  EFTPOS cards generally have lower charges than credit cards.  They also have less potential for penalties and charges, such as low usage fees and over the limit fees.