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Prepaid Vs. Credit Card In Kenya. Which One Should You Use?
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Prepaid Vs. Credit Card In Kenya. Which One Should You Use?

Alex, a 36 years old HR manager at a media company, has been considering adopting card payments to pay for his daily expenses. He thinks they fit his lifestyle more perfectly than other payment methods, specifically mobile and cash payments. 

Alex is particularly attracted to card payments because of their convenience, versatility, and how they can help him manage and control his expenditure. But he had one concern. He didn’t want to use his bank-issued debit cards (cards linked to your bank account, commonly known as ATM cards) to shop and pay for services, as that could lead to overspending and raise other security issues. But he consulted his bank, and they suggested he gets a credit or prepaid card.

Prepaid and credit cards offer different features and benefits, and they can both help Alex with his conundrum. The main difference between the two products is that prepaid cards must be loaded with money, while credit cards use borrowed money. Plus, there are pros and cons to both.

After carefully considering their difference, Alex eventually chose a card that matched his financial needs. 

Are you in the same dilemma and wondering what card to choose between prepaid and credit card? Then this article is for you. We will explore in detail the difference between these two products to help you decide which one is better for you.  

Read Also: Credit Card vs. Debit Card: Which One Should I Choose?

Prepaid Cards and How They Work

Prepaid cards are cards you can use to make payments using money pre-loaded onto the card. It allows you to spend the amounts stored on the card. Unlike debit cards, these cards aren't linked to your bank account, and you need to reload them online, via mobile money, bank cash deposit, inter-account transfers, or at an ATM once you deplete your funds.

Prepaid cards are like debit cards without a bank account, and they are generally accepted anywhere that accepts debit or credit cards, for example, when shopping online, at point-of-sale machines at retail outlets, or when paying for online subscriptions. 

Prepaid cards are issued by banks and come with the branding of major payment networks such as Mastercard and Visa. These cards have minimal application requirements and do not affect your credit score or history.

For people who cannot access a credit or debit card, prepaid cards can be very useful. Credit scores are not checked when applying, and you don’t need a bank account. To get one, you will typically need to visit a bank with your identification documents and KRA PIN. 

Prepaid cards allow you to enjoy the independence of managing your money safely and conveniently and can help you track your spending.

Read Also: Tracking Finances: Top Tools to Advance Your Life Goals

Pros and Cons of Prepaid Cards

Advantages of Prepaid Cards:

  • Easy Application Process: Prepaid cards have few requirements compared to credit cards.
  • Handy Budgeting Tool: Prepaid cards can help individuals manage their finances by providing spending tracking and monitoring features. Cardholders can check balances and activity through mobile apps, online platforms, or phone services.
  • No Credit Check: Unlike traditional credit cards, prepaid cards don't require a credit check, making them accessible to individuals with limited credit history or poor credit scores.
  • Safe and Convenient: Prepaid cards offer a secure alternative to carrying cash, reducing the risk of theft or loss. They are widely accepted and provide a convenient payment option for various purchases.
  • Multicurrency Option: Many prepaid cards support multiple currencies, making them convenient for online shopping and international travel. You can load your card with specific supported foreign currency and eliminate exchange fees you’ll otherwise incur.

Disadvantages of Prepaid Cards

  • Fees: Prepaid cards often have multiple fees associated with them depending on the issue, such as activation fees, monthly maintenance fees, transaction fees, ATM withdrawal fees, balance inquiry fees, and more. These fees can accumulate and reduce the card's value, making it less cost-effective than other payment methods.
  • No impact on credit score: Using a prepaid card doesn't affect your credit score because credit reference bureaus do not receive transaction information from these cards. Consequently, prepaid cards cannot help you establish or rebuild your credit history.
  • Limited benefits and perks: Prepaid cards typically offer no incentives such as cashback rewards, travel insurance, extended warranties, or other credit card benefits that can save money or provide additional protection.

Uses Cases of Prepaid Cards 

You can use your prepaid card for multiple purposes, including:

  • Making Purchases: Prepaid cards allow you to buy things in various ways, whether it's shopping in physical stores or making online purchases.
  • Gifting: You can gift a loved one a loaded card. Instead of giving cash or specific items, a prepaid card gives the recipient the freedom to choose what they want. 
  • Cash Withdrawal: Prepaid cards can be used to withdraw cash from ATMs or banks, providing quick access to funds when needed.
  • Direct Deposit: You can have your wages or funds directly deposited onto the prepaid card. This can be useful if you don't have a traditional bank account at a specific bank or prefer to manage your finances through a prepaid card.
  • Bill Payments: Many prepaid cards offer the option to pay bills directly from the card. This allows you to track your spending and ensure timely payments conveniently.

Read Also: How to Automate Your Finances in Kenya

How to Choose the Right Prepaid Card 

Banks typically offer different types of prepaid cards depending on your needs. Determine whether you need a general-purpose or specialized card (e.g., Multi-user card), and compare activation, maintenance, and transaction fees. 

Next, evaluate reload/funding options like direct bank deposit, MPESA, or bank transfer. Look for features like mobile apps, online account access, and purchase protection. You should also ensure the card has widespread acceptance and the issuer offers good customer support. Finally, consider security features such as chip and PIN technology and fraud protection. 

Credit Cards and How They Work

Credit cards allow you to make purchases and pay bills using borrowed money. In simple terms, when you use your credit card to buy something, the credit card company pays for it on your behalf.

Credit cards typically come with a predetermined credit limit based on the bank's evaluation of your financial situation. For example, if your credit limit is Ksh50,000, your credit card will be preloaded with that amount. The issuer might allow you to go beyond the limit.

Your credit card issuer will send you a bill for the purchases you make, usually at the end of each billing period. You will owe the loan to the credit card issuer until you repay the borrowed money.

Credit cards can offer flexibility in how you spend money, but it's important to be willing and able to repay the borrowed amount and pay interest charges if you can't settle the bill on time. Typically, credit cards have a grace period of 30 to 55 days, depending on the card issuer, from the day you make a purchase. 

When you use your credit card to make payments, your debt or outstanding balance increases, and you exhaust your credit limit. To avoid interest obligations, you must repay the outstanding balance by the end of the grace period.

Credit cards offer revolving credit. This means you can constantly borrow and repay as you have an open line of credit. You can spend from your card again when you pay down your outstanding balance.

While credit cards have several benefits, such as purchase protection and improving your credit score, they are a form of debt. If you don't fully repay what you owe to the credit card company, they will charge you interest. And if you don’t control your spending, make and/or make timely payments, or miss payments, credit cards can seriously harm your credit score.

Getting a credit card can be more challenging compared to obtaining a prepaid card. Banks typically have stricter eligibility criteria and consider different factors such as your income and credit score when evaluating your application.

Read Also: What to Know About Credit Cards in Kenya

Pros and cons of Credit Cards

Advantages of Using a Credit Card

  1. Making Emergency Purchases: Credit cards enable you to make purchases that may not have been possible otherwise when experiencing cash flow issues such as delayed salary. 
  2. Building Credit History: By responsibly using a credit card, you can establish a positive credit history and improve your credit score. This can come in handy when obtaining larger loans in the future, such as car loans or mortgages.
  3. Grace Period: If you pay off your credit card balance in full every month, you won't be charged any interest on your transactions. This means you can enjoy the convenience of a credit card without incurring additional costs.
  4. Track Spending: Your credit card issuer will send you a monthly bill statement showing how and where you spent your money. This can help you understand your spending habit.
  5. Rewards and Cashback: Many credit cards offer rewards programs or cashback incentives. These benefits can include discounts, points, or cashback on purchases made with the card.
  6. Convenience: Credit card is accepted everywhere debit and prepaid card is accepted. You can use it to shop and pay bills.

Disadvantages of Using Credit Cards

  1. The temptation to overspend: Credit cards make overspending easy due to their convenience.
  2. Fees: Credit cards may have annual fees, and cash advance fees when you withdraw money from an ATM using your card, and you will pay interest rates after the grace period.
  3. Strict application: Obtaining a credit card often involves a more rigorous application process and stricter eligibility criteria than prepaid cards. This can include factors such as credit history, income verification, and employment status.

Uses Cases of Credit Cards 

A credit can help you: 

  • Manage finances: Credit cards offer a convenient tool for tracking expenses and creating a budget.
  • Access emergency funds: Credit cards provide quick access to funds during unexpected financial emergencies.
  • Build credit: Responsible use of credit cards helps you establish and improve your credit history.
  • Earn rewards: Many credit cards have rewards programs that allow you to earn cash back and other incentives while making everyday purchases.

Read Also: Ten Reasons to Use A Credit Card

How to Choose the Right Credit Card

Choosing the perfect credit card requires careful consideration of several essential factors. First, consider interest rates (APR) and other fees. Opt for a card with a low APR, affordable annual fees, and transparent additional charges to save yourself from unnecessary financial strain. 

Second, ensure that the minimum repayment aligns with your budgetary constraints. Lastly, select a card with rewards and cashback options that best suit your needs, allowing you to maximize your financial benefit.

Credit Card vs. Prepaid Card: What Are The Main Differences

What Should You Use: Prepaid Cards or Credit Cards?

When deciding which cards to use, you should consider your lifestyle, spending habits, and your current financial situation. Second, consider the main uses of both cards and how they can complement your finances.

For instance, a prepaid card may be suitable if you seek an everyday card that eliminates concerns about overdrafts and interest rates. Additionally, if you aim to separate your savings and expenditure accounts, avoid accumulating debt, and manage your finances more effectively, a prepaid card can serve as a solution.

On the other hand, if your goal is to improve your credit score and qualify for larger loans in the future or build a relationship with a lender, you should consider a credit card.

If you already have a good credit score, exercise discipline in your spending habits, and are confident in your ability to consistently pay off your credit card balance, applying for a credit card may be a more advantageous option as you’ll get to enjoy the rewards and perks. However, if you tend to overspend or have struggled with debt in the past, a prepaid card will work best for you.

It is essential to consider the long-term costs associated with each option. While prepaid card fees may initially appear insignificant, they can accumulate over time with continuous usage. On the flip side, credit cards can be cost-effective if you avoid cash withdrawal charges and diligently pay off your balance to avoid interest charges. 

However, it is crucial to be mindful of the potential consequences of not paying the balance in full, as the outstanding balance combined with interest can quickly snowball. Finally, It is worth noting that the charges incurred on your credit card can be offset by the cash-back rewards and other incentives that come with its usage.

Read Also: Who Is A Credit Card Not For? 


Prepaid and credit cards offer different features and benefits, so it's important to choose a card based on your financial situation, goals, spending habits, and card usage. If you want a risk and debt-free financial experience, acquiring a prepaid card might work for you. However, if you have good control over your spending habits, a credit card can be beneficial. 

Finally, when making your decision, remember to shop around and compare different cards. For example, if you're considering credit cards, you can use's free comparison tool to compare credit cards available in Kenya based on interest rates, rewards, minimum repayment, and more.

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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