Offshore Debit vs Offshore Prepaid Cards: Which is Better?

Most of us have and use debit, credit, or in rarer cases offshore prepaid cards. Not everyone realizes the differences between the 3 as between characteristics and unique features thereof. Different card types suit different occasions and purposes. Knowing what card is best to acquire and how to do it with minimum tax obligations and confidentiality risks is knowledge anyone should possess. FYI: the International Wealth seasoned pros are ready to share their experience and help you sort out the matter.

Offshore card types and characteristics thereof

Let’s see what bank cards are available on the market and what differences they have. As things stand, 3 main card types exist. Not all of them are linked to a bank account. This is why under certain circumstances you may conduct financial transactions without the regulators’ knowledge.

Debit cards as a safe bet and an opportunity to follow the law

Debit cards are typically linked to a checking or a current account. As a debit card holder, you may make transactions with the funds you have on your account. The cards you may use vary. The most popular Visa, Mastercard, or UnionPay cards are accepted and serviced within certain states.

Below, you will find the things you should know about debit cards:

• Cards may come with the holder’s name although it is not a universal rule. Certain banks issue instant debit cards that are cheap to get. The issuing bank stores the holder’s info that it receives when the latter opens an account therewith.
• With next to zero confidentiality debit card beneficiaries enjoy, bank customers are subjected to KYC verification procedures as provided for under FATF and OECD standards and requirements when opening an account with the bank.
• Issuing bank and the seller record all transactions, and where data are transferred abroad, they shall be transmitted to the customer’s tax residency state.
• Offshore debit cards are a functional instrument to make settlements overseas, when moving or studying abroad, and while traveling across the globe. Feel free to keep and save money thereon but remember the regulators are there to keep an eye on you and your transactions. If you violate their requirements, they may act tough and nasty.
• No matter whether their debit cards are plastic or virtual, holders thereof may change the preset protection level, transaction limit, and other criteria using their bank app and/or profile therein.

Depending on the user account type and extra services ordered, debit card benefits vary. The latter can include insurance coverage, bonuses, warranties for goods you purchase, etc. 

Credit cards: Anglo-Saxon model

To give you money, almost every credit card employs an advance payment principle. The bank supplies funds to the holder thereof, and the latter repays the credit with the interest accrued. Depending on a particular situation, it can be a mixed blessing. FYI: if you use the card as you are supposed to you can avoid paying interest which is a beyond-doubt advantage.

Say, the bank sets an interest-free period for your credit card account. It may be 30, 50, or 100 days and even a year on occasion. Credit card terms vary with different banks, so reading a credit agreement thoroughly while paying attention to the slightest detail is a sound idea. From interest rates to penalties and fines – be sure to take note if you want your credit card use to be hundred-percent issue-free.

What is an offshore credit card and how can you use it? The way you obtain and handle a credit card is no different from the one for debit cards. Potential card holders shall undergo the same KYC procedures, enjoy the like confidentiality and anonymity, and cards are likewise issued in 2 forms, i.e., plastic and virtual ones. With the above in mind, differences do exist:

• Credit cards come with monthly payments. Either in full or in part, you pay invoices or bills once a month, with exact amount depending on the money spent.
• If you are late with a payment, it may prove costly. With the increased credit rate and extra expenses inflicted, missing credit payments or being late with them is not recommended.
• Oftentimes, banks charge management fees for credit cards they issue, so watch out for it.
• With credit cards, withdrawals and transfers are fee-based.

Offshore credit cards offer certain advantages providing for fast or immediate withdrawals, financing work or study expenses, business, traveling, or shopping sprees. Be advised that proper expense planning and timely payments are essential for proper credit card usage.

Prepaid cards: new product on the international bank market

Prepaid cards are newcomers on the market providing for an opportunity to exclude banks and use other payment providers instead. Offshore prepaid cards secure higher anonymity for holders thereof. Originally an Anglo-Saxon invention, prepaid cards were introduced in the EU after the SEPA law ratification back in 2009. 

A useful and convenient financial instrument allowing holders thereof to make transactions with no involvement of regulators or tax authorities, modern prepaid cards are indispensable on multiple occasions. It does not mean they let you evade taxes and siphon off money. Prepaid cards pursue different goals, none of which violate international legislative provisions.

Prepaid cards may be disposable and non-disposable. The former come with a limit and once exceeded, a prepaid card is no longer valid.  You can either purchase a prepaid card and load a certain amount thereon or receive it as a gift (alternatively, give it as a gift to a friend). 

Multiple banks around the globe issue non-disposable prepaid cards that can be reloaded. A non-disposable prepaid card like this resembles a debit card albeit does not require a bank account to use it.

To better understand how prepaid offshore cards work, let’s go deeper into details:

• Prepaid card transactions – any transactions are allowed. Feel free to withdraw or transfer funds, make online transactions or pay for goods and/or services you order. Offshore anonymous cards may have payment and transaction limits so it is better to find out about them in advance.
• Card limit denotes an amount loaded on a prepaid card. These are typically small amounts up to USD 3,000.
• You don’t need a separate account to have a prepaid card issued for you. With multiple transactions not going through banks, the payment provider sets up an e-wallet with an online account linked thereto (a.k.a. bankless account). This is a huge bonus for those worried about confidentiality.
• Prepaid anonymous cards have limits (be sure to learn about yours from the issuing bank). Typically they do not exceed EUR 1,000. Such prepaid anonymous cards don’t have the holder’s name on them. Where a transaction is made, the seller transfers info with the issuing bank details without identifying the prepaid anonymous card holder.
• Where a prepaid card is issued, the issuing bank requests the holder’s personal data, including, inter alia, a residential address. For the above purpose, the issuing bank asks them to produce a passport or any other accepted ID. Mind that tax IDs aren’t required.

Small limits and no virtual versions are the only drawbacks prepaid anonymous cards have. That being said, with their multicurrency potential, prepaid anonymous cards are among the most beneficial instruments for globetrotters. 

Offshore anonymous cards – possible choices

If you want to make your overseas transactions completely anonymous, neither debit nor credit cards are of any use. Even with a prepaid card, high confidentiality is not guaranteed to the holder. Typically, the issuing bank location, the information the customer provides for KYC verification purposes, and the like data “betray” them and ruin confidentiality.

The cardholder’s ultimate confidentiality depends on 2 factors:

• KYC procedures as the result of which the cardholder’s personal data are stored by the issuing bank. The latter may later on share them with tax or financial authorities of the offshore state on request.
• Common Reporting Standard, or CRS implying financial information exchange. Where the state issuing an offshore prepaid card shares financial and tax data with its foreign counterparties, the risk of becoming visible to tax authorities is apparent.

The 2 issues mentioned above materially influence confidentiality levels. However, the list is not complete, and several other factors come into play, including, inter alia, transaction types and amounts.

Ways to use offshore prepaid cards without being visible to tax authorities 

Below, you will find several recommendations that can prove useful if you wish to remain invisible to tax authorities while abroad and make transactions with offshore prepaid cards with no major restrictions:

• Card in question shall be anonymous, i.e., come with no holder’s name and minimum KYC requirements. A potential cardholder providing their name and residential address with no tax info in the course of KYC procedures increases their future confidentiality.
• Country issuing an offshore prepaid card can’t be a CRS member state. As of November 2022, these are Armenia, the US, Georgia, Paraguay, the Philippines, and several small offshore jurisdictions. 
• Best offshore prepaid cards are issued in offshore jurisdictions not controlled by the US and the EU.
• Offshore prepaid card payment system shall be popular in the region it is supposed to be used in and not fuel any suspicions due to being too unique.
• You should withdraw money from your offshore prepaid card in several ways: by purchasing goods in POS or withdrawing cash in ATMs that sit in big shopping centers with large tourist numbers. If you seldom use offshore prepaid cards, most often to withdraw money above the set limits, the regulators will take interest in it.
• It is best if an offshore prepaid anonymous card has an exotic BIN and enhanced P2PE protection. With their data encrypted with P2PE, the seller is unable to read the holder’s info, with their code remaining unreadable.
• Avoid overspending and try to limit yourself to relatively modest amounts that the regulators won’t treat as money laundering or tax evasion. With not-to-exceed limits set by every particular state, the exact amounts are hard to stipulate. 

How to get a prepaid anonymous card

The International Wealth industry pros are here to help you use offshore prepaid card benefits to the max. Here’s what we can assist you with:

• open bank accounts for non-resident individuals and foreign companies
• obtain cards (including inter alia debit, offshore, prepaid, and anonymous ones) no matter what your citizenship is
• hold free tax and confidentiality consultations
• offer comprehensive support for UnionPay card holders, with UnionPay cards known as the most convenient payment option for travelers and foreign citizens wishing to pay in various currencies while maintaining their confidentiality.