Credit vs. Prepaid: What Founders Need to Know Before Building a Card Product

Same form factor. Very different infrastructure.

They look identical in-hand, but credit and debit cards are very different on the back end. Prepaid cards are stored value products. (The customer is spending their money.) Credit cards are revolving loans. (The customer is spending your money.) From the infrastructure to the required day-to-day management, they're entirely different products.

Some vendors blur the lines in their marketing, making it seem as if you can build a credit product off of prepaid infrastructure. While some vendors genuinely support both, we advise clients to tread carefully and ask lots of questions to ensure the infrastructure is built specifically to the product you're launching (not one that looks similar in a wallet).

Here are some specific distinctions you should pay attention to:

1. Ledgering and Fund Flow

• Prepaid: The user loads their own money. You’re just moving funds.

• Credit: You’re extending credit, tracking balances, interest, and repayment.

• > Credit products require real loan accounting and servicing logic.

2. Compliance Requirements

• Prepaid: Covered by Reg E.

• Credit: Governed by Reg Z, TILA, FCRA, ECOA—and more.

• > Launching credit means handling more disclosures, payment handling, and adverse action notices.

3. Underwriting & Risk

• Prepaid: Fraud, KYC & KYB checks.

• Credit: Comprehensive credit risk policy, credit risk modeling, analytics, and monitoring.

• > Sponsor banks will expect detailed documentation and ongoing oversight, not just a credit box.

4. Tech Stack

• Prepaid: Often supported end-to-end by a sole BaaS platform.

• Credit: Requires a Loan Origination System, Loan Management System, servicing and ledgering infrastructure, all communicating with each other and with your card network and sponsor bank.

• > Credit programs are more complex and require tighter vendor orchestration.

5. Servicing & Account Management

Prepaid: Minimal post-transaction operations: disputes, chargebacks, etc.

Credit: Ongoing cycles, payments, delinquencies, and collections. Credit line increases for ongoing risk management.

> Credit servicing requires far more resources.

Where Ensemblex Comes In

Credit cards are undoubtedly far more complex, but with the right people, you can launch a credit card quickly.

We help fintechs:

• Decide whether credit is the right path

• Choose the right infrastructure stack

• Build sponsor-bank-ready credit policies

• Launch compliant, scalable credit card programs

We’ll give you the real, honest picture of what it takes to launch credit products, and cost-effective ways to do it.