Prepaid means paid for in advance, before you actually use or receive something. When you buy a prepaid phone card, you pay money upfront and then use that credit to make calls later. When you get a prepaid debit card as a gift, someone has already loaded money onto it for you to spend.

This is different from most purchases, where you use something and then pay for it afterward (like a restaurant bill) or pay as you go (like pumping gas). With prepaid items, you hand over your money first, then use what you've already purchased.

Many services offer prepaid options: prepaid college tuition plans, prepaid postage on envelopes, prepaid subscriptions to magazines. Some families use prepaid electricity meters that you load with credit before using power in your home. Prepaid options can help people budget their money carefully, since you can only spend what you've already paid for. You might receive a prepaid gift card for your birthday, already loaded with $25 to spend however you want. The key idea is always the same: money changes hands before you use the product or service.