What are the limitations of prepaid payment cards (compared to credit cards)?

Question

I am currently unable to get a credit card¹, but I wish to be able to buy goods from web stores, to buy airline tickets, to rent cars, hotel rooms, etc. Through my bank I only have a Member Card, which is part of the Cirrus®, Interac®, TheExchange®, and Accel® networks, but which cannot be used for any of the aforementioned tasks². I am considering to get a prepaid payment card, but this post states that those are not credit but debit cards. With my current debit card (perhaps the correct term is ATM card), I can not do online purchases, I can not buy airline tickets, I can not rent cars, I can not reserve hotel rooms. I can use it worldwide to pay in-store or take out money at ATMs.

What limitations does a prepaid payment card have compared to a full credit card? For example, can it be used to buy goods from webstores? To buy airline tickets? To rent cars? To reserve hotel rooms?

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¹ ^{My financial institution requires an Ontario photo identification. The accept either an Ontario Driving License or an Ontario Photo ID. To transfer my Dutch driving license to an Ontario one, I need to go through some bureaucracy and then do the G2 test. The Ontario Photo ID is only available to non-drivers, and if I apply for one, I relinquish any opportunity to transfer my Dutch driving license to an Ontario one, and would need to go through the full graduated driving license system, meaning it takes at least 2 years to get a license.}

² ^{I went to the airport in the hope I could buy an airline ticket there, but this turned out to be not possible. I could try a travel agency — the booking fees there might or might not be lower than the fees associated with a prepaid payment card.}

Answer 1

In general what you will find is that a prepaid debit card will allow you to make any sort of purchase that is not also used as a "Security" against possibly open ended charges. A hotel wants to have a method of payment on file that they can potentially charge for damages to a room for example. The same goes for a car rental.

Another limitation you will discover is when you are getting close to the amount of money that remains on the card. A restaurant will typically send through a preauthorization for the bill amount + 25%(for example) to account for a tip. If you have $60 left on your card and the bill is $50, the preauth may not be approved.

Some prepaid debit cards, particularly those that are non-reloadable, start charging a service fee just for having the card after a certain period of time. This seems to be after a year, but YMMV.

Lastly make sure that the card you get is reloadable. Some, like gift cards and rebate cards are sold to the buyer with a fixed amount on them and you cannot add additional money to them.

Answer 2

The post that you linked to saying that a pre-paid credit card is really a debit card is kind of right and kind of wrong.

From your point of view, to get a $1000 pre-paid credit card, you need to hand over $1000. So nobody is giving any credit to you. You can only spend money that you actually own, like a debit card.

For the merchant accepting your card, it is exactly like a credit card. He doesn't know what deals you had to make to get the card. The merchant just knows that up to some amount, he will receive money. So in that sense it is a credit card and will be accepted like a credit card.