Debit Card, Credit Card, or Prepaid Debit Card for Gen Z Consumers

It’s a question we hear again and again. Debit card or credit card or prepaid debit card – which one is right for me?

September 14, 2023


It’s a question we hear again and again. Debit card or credit card or prepaid debit card – which one is right for me?

But… why is that?

Debit cards, prepaid debit cards, and credit cards offer their own unique pros and cons.

There’s also a ton of variation amongst banking providers and specific cards. So, the best option really depends on your needs!

In this blog, we will:

  • Dive into the debit card or credit card or prepaid debit card debate
  • Discuss what a prepaid debit card is
  • Discuss pros and cons of each for Gen Z consumers
  • Look at statistics and trends around card usage
  • Suggest an eco-friendly card alternative

Let’s get started.

Gen Z’s Card Preferences 

The oldest members of Generation Z (born 1997 to 2012) have entered the workforce and are shaping their financial futures.

But, they are acting in very different ways to previous generations. 

Growing up with the internet and rapidly advancing technology have made them tech savvy… and existing during the climate crisis has made them socially and environmentally conscious. 

58% of Gen Z use a debit card as their primary payment method. Just 18% use a credit card as their primary payment method (Source: Bankrate). 

And, unsurprisingly, they want online banking.

99% of Gen Z and 98% of millennials use an online banking app for a wide range of tasks. (Source: CNBC

Most debit card purchases are under $100.

Debit card usage is also rapidly replacing the use of cash when shopping at brick and mortar stores. 

Debit Cards, Credit Cards, and Prepaid Cards

While debit and credit cards look similar and are often issued by the same financial institutions, they serve different purposes.

A debit card is linked directly to your checking or savings account, and when you shop, the funds are immediately deducted from your account balance. On the other hand, a credit card provides you with a line of credit – kinda like a short-term loan from the card issuer – and you have to pay off your credit bill later. There are also prepaid reloadable debit cards which allow you to reload money onto a debit card from your bank account.

Debit Card Pros & Cons

  • As you can only spend the money you have in your account, it helps you avoid debt 
  • Using a debit card does not impact your credit history or credit score
  • Debit card transactions do not accrue interest charges, but you may see fees for things like using an out-of-network ATM
  • Most debit cards don’t offer rewards programs or cashback benefits

Prepaid Debit Card Pros & Cons

  • A controlled spending environment that is great for budgeting and reducing overspending
  • Prepaid cards can be used as a gift or a way to give allowances to children or dependents
  • Select prepaid debit cards have activation fees or ATM withdrawal fees
  • A prepaid debit card does not contribute to your credit score, unlike a credit card – but it also does not negatively impact it and does not require a credit check

Credit Card Pros & Cons

  • Using a credit card responsibly can positively impact your credit score
  • Most credit cards come with rewards programs with cashback rewards or a points-based system
  • Credit cards can carry high-interest rates, known as APR (annual percentage rate), which apply to outstanding balances if you don’t pay your bill in full each month
  • Exceeding your credit limit, or not paying your credit bill off in time, can lead to fees and penalties including a lower credit score

The Karma Wallet Card

According to a 2020 study, 66% of Gen Zers are willing to pay more for sustainable or environmentally friendly products, and 73% are willing to pay more for ethically sourced products.[Source: Kadence]

In short, the next generation of consumers want their money to make a positive impact.

That’s where the Karma Wallet Card comes in. 

The Karma Wallet Card is a prepaid, reloadable debit card that puts people & planet first – allowing your finances to make a positive impact. It pairs the cashback rewards† you expect from a credit card, with the ease of use of a debit card.

Want to learn more about what a prepaid reloadable debit card is? Click here!

And… it includes an innovative mobile banking app that makes it easy to see the impact of your purchases, find sustainable brands, and manage your money.

More about the card:

  • Donates to reforestation projects through One Tree Planted every time you fill up on gas or use ride share apps
  •  Donates a meal to someone in need through Feeding America when you eat at a restaurant or order food delivery
  • No minimum balance fees, no hidden fees, and free ATM withdrawals at over 50,000+ locations
  • Won’t negatively impact your credit score, and is easily reloadable to help you manage your money effectively 
  • Up to 20% cashback† on thousands of sustainable companies 

There are a ton of pros and cons to credit cards, debit cards, and prepaid debit cards – it all comes down to which features matter the most to you and your finances. Want to learn more about the Karma Wallet Card? Check it out below!

*Up to 20%* cashback with eligible brands. The Karma Wallet Visa® Prepaid Card is issued by Pathward®, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. The Karma Wallet Visa Prepaid Card is powered by Marqeta. The Karma Wallet Visa Prepaid Card can be used everywhere Visa debit cards are accepted.

This optional offer is not a Pathward product or service nor does Pathward endorse this offer.

The opinions expressed in this article are the author’s own and do not reflect the view of Pathward.