Which type of card has a balance that is not tied to a DDA or another financial institution account?

Which type of card has a balance that is not tied to a DDA or another financial institution account?

• A. Prepaid/Stored Value card
• B. Debit card
• C. Credit card
• D. Loan card

Answer: (A)

The correct answer is a prepaid or stored value card, as this type of card allows users to load a specific amount of money onto it in advance, and its balance is not linked to a demand deposit account (DDA) or any other financial institution account. Users can spend only the amount that has been preloaded onto the card. This makes prepaid cards particularly useful for budgeting, gift-giving, or specific spending purposes, as they do not draw funds from a linked bank account. In contrast, debit cards are directly connected to a checking or savings account, allowing users to spend funds that they have in their account. Credit cards allow users to borrow money up to a certain limit, requiring repayment later, which also ties their balance to an underlying line of credit rather than a prepaid amount. Loan cards, which aren't universally recognized, are typically associated with borrowing and repayment of loans. Thus, the fundamental characteristic of a prepaid or stored value card is the independence of its balance from any financial institution’s account, setting it apart from the other types of cards mentioned.

The correct answer is a prepaid or stored value card, as this type of card allows users to load a specific amount of money onto it in advance, and its balance is not linked to a demand deposit account (DDA) or any other financial institution account. Users can spend only the amount that has been preloaded onto the card. This makes prepaid cards particularly useful for budgeting, gift-giving, or specific spending purposes, as they do not draw funds from a linked bank account.

In contrast, debit cards are directly connected to a checking or savings account, allowing users to spend funds that they have in their account. Credit cards allow users to borrow money up to a certain limit, requiring repayment later, which also ties their balance to an underlying line of credit rather than a prepaid amount. Loan cards, which aren't universally recognized, are typically associated with borrowing and repayment of loans. Thus, the fundamental characteristic of a prepaid or stored value card is the independence of its balance from any financial institution’s account, setting it apart from the other types of cards mentioned.