Do the Visa and Mastercard Gift Cards Work Like a Regular Credit Card?

Visa and Mastercard gift cards work differently than credit cards

Some credit card companies, including Visa and Mastercard, sell prepaid gift cards that come stocked with a certain amount of money. Consumers can redeem them at almost any location that accepts the company's credit cards.

Features

Although branded with a credit card company's logo, these gift cards are actually a variety of debit card. When a user charges a purchase to them, the price of the purchase is withdrawn from a specific account and user are informed of the card's remaining balance. Some cards can be reloaded, but others cannot.

Differences

While a debit card is used to withdraw money from an account held with a retail bank, credit cards are a means of securing a loan from a lending institution. Visa gift cards offer their user no line of credit, only access to funds held in an account.

Misconceptions

Many debit cards are branded with a credit card company's logo. When ringing up a purchase with such a card, a cashier will usually ask the customer whether she would like the purchase paid for by "debit" or "credit." If the customer selects "credit," he is not using the card like a credit card, but merely routing approval of the purchase through a credit card company. In both cases, the money would be withdrawn from the same account.

References

• CitiBank: How Credit Cards Work
• Mastercard: Prepaid Cards FAQs
• Visa: Visa Gift Card - How It Works