What is a prepaid card - Benefits, use cases and how it works
Prepaid cards for business expenses are an alternative payment option that can benefit businesses in a number of ways.
Unlike traditional payment methods, such as checks or credit cards, prepaid cards are funded in advance and can be loaded with a specific amount of money. This makes them a great option for businesses looking to streamline their payment processes or provide a more flexible payment option for their customers.
Prepaid cards can also be used as a tool to manage expenses, as they can be set up to only allow purchases from specific merchants or for specific purposes.
Use cases for prepaid cards include employee expense management, gift card programs, and customer rewards programs. Overall, prepaid cards offer a secure, convenient, and cost-effective payment solution for businesses of all sizes.
What is a prepaid card?
A prepaid card is typically a payment card that is preloaded with funds in advance. These cards can only be used to withdraw cash or make purchases up to the balance that is available.
Prepaid cards for business expenses can be used for a variety of purposes, like payroll cards, travel cards, gift cards, or even as subscription management cards. These cards also come in a digital format as virtual prepaid cards.
Virtual prepaid cards offer the same benefits as physical cards, but without the need for a physical card to be issued and delivered, making them a convenient and flexible option for online purchases and digital transactions.
Benefits of prepaid cards for business expenses
One of the primary benefits of using prepaid cards for business expenses is security. Prepaid cards are protected with a unique PIN or security code, which helps prevent unauthorized access and fraudulent purchases.
In addition, prepaid cards do not require access to a bank account or credit line, which can further reduce the risk of fraud and unauthorized transactions.
Prepaid cards can help reduce debt accumulation by limiting spending to the amount loaded onto the card.
Unlike credit cards, prepaid cards don't allow users to spend more than what's available. This can prevent overspending and help people stick to a budget. Also, since prepaid cards don't involve borrowing money, users don't accumulate debt and won't have to pay interest.
Business prepaid cards for employee expenses also enable better record keeping.
Prepaid card transactions are recorded electronically, which makes it easy to track expenses and generate reports. This can help businesses identify areas where they can cut costs or improve their budgeting strategies.
Prepaid cards also offer improved expense control, as they can be set up to limit spending to a specific budget or to only allow purchases from certain merchants.
This helps ensure that employees only spend money on authorized expenses, reducing the risk of overspending or misuse of funds.
Prepaid cards can only be used to spend the amount of money that has been preloaded on them. This means that even if the card does get stolen your actual funds will always stay protected, only the amount available in the cards will be at risk.
Additionally, these cards come equipped with approval workflows that further secure the proper utilization of funds.
Finally, prepaid cards are a great tool for budgeting. Because they limit spending to the available balance, prepaid cards can help businesses stay within their budget and avoid overspending.
This can help businesses improve their financial management and achieve their long-term financial goals.
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5 use cases of prepaid cards for business expenses
1. Employee expense management
One of the primary use cases of prepaid cards for business expenses is to manage employee expenses. Traditionally, businesses have used expense reports to reimburse employees for business expenses.
However, this process can be time-consuming, and there is always the risk of fraud or errors in expense reporting. Prepaid cards offer a much simpler way to manage employee expenses.
Employers can load funds onto prepaid cards, which employees can use for business-related expenses. These expenses can be tracked and monitored in real-time, providing better visibility and control over spending.
Additionally, employees no longer have to pay for expenses out of their own pockets, and they don't have to wait for reimbursements. This can improve employee satisfaction and reduce administrative overhead.
2. Business travel expenses
Business travel expenses can be a major headache for businesses, particularly when it comes to managing receipts and reimbursements. Prepaid cards can simplify this process significantly.
By providing employees with prepaid cards for travel expenses, businesses can ensure that employees have access to funds for transportation, lodging, and meals. These expenses can be tracked and monitored in real-time, eliminating the need for employees to submit receipts and expense reports.
Additionally, prepaid cards can be set up to only allow spending at specific merchants or in specific categories, providing better control over travel expenses. Finally, prepaid cards can be reloaded remotely, ensuring that employees always have access to funds when they need them.
To know more in detail, check out our article to discover the benefits of using a corporate travel card for a seamless business travel experience.
3. Purchasing and procurement
Prepaid cards for business expenses can also be used for procurement and purchasing purposes. These cards can be used to pay for equipment, supplies, and other such purchases related to business.
By using prepaid cards, businesses can significantly reduce the possibility of fraud or errors in purchasing, as purchases can be tracked and monitored in real-time.
Additionally, prepaid cards can be set up to only allow spending at specific merchants or in specific categories, providing better control over purchasing.
Related read: 7 step procurement process and how to simplify it using virtual cards?
4. Incentives and rewards
Prepaid cards can also be used as incentives and rewards for employees.
Businesses can load funds onto prepaid cards as a way of rewarding employees for their hard work or meeting specific goals. This can be a more flexible and cost-effective way of providing incentives than traditional cash bonuses.
Additionally, prepaid cards can be customized with the company's branding, providing an additional level of recognition for employees.
5. Contingency planning
Finally, prepaid cards can be used as part of a contingency plan for businesses. In the event of an emergency or natural disaster, businesses may need to quickly provide funds to employees or contractors.
Prepaid cards can be loaded with funds ahead of time, ensuring that employees have access to funds when they need them.
Prepaid cards implementation and best practices
Choose the right card provider
Choosing the right prepaid card provider is critical to the success of the program. Look for a provider that offers the features and functionality that meet your business needs, such as real-time monitoring, customizable spending controls, and reloadable cards. Consider the provider's fees, customer support, and security measures as well.
Integrate into existing system
To ensure a smooth implementation, it's important to integrate the prepaid card program into your existing expense management system. This includes setting up reporting, tracking, and reimbursement processes, as well as integrating the prepaid card provider's platform into your accounting or ERP system.
Establish clear policies and procedures
Clear policies and procedures are essential to ensure that employees understand how to use prepaid cards and what expenses are eligible. This includes guidelines around spending limits, merchant categories, and documentation requirements.
Make sure to communicate these policies clearly to all employees and provide ongoing training as needed.
Train employees
Providing training to employees on how to use prepaid cards can help ensure that the program is successful. This includes training on how to use the card, how to track expenses, and how to report expenses for reimbursement.
It's also important to provide ongoing support and training as needed to ensure that employees are comfortable with the program.
Continuously monitor and review expenses
Monitoring and reviewing expenses regularly is essential to ensure that the program is working effectively and that employees are using the cards appropriately. This includes reviewing spending reports, tracking expenses against budgets, and addressing any issues or discrepancies as they arise.
Why get Volopay’s corporate cards for your business?
With so many card providers crowding in today’s market, it can become quite difficult to pick the best option.
However, if you’re looking for a card provider that is both affordable as well as loaded with features then Volopay is definitely an option to consider.
With Volopay you get both physical as well as virtual corporate cards to manage the entirety of your business expenses. These cards come equipped with all the features needed to manage business and employee expenses easily. This includes easy creating and blocking or freezing, approval workflows, real-time expense tracking, monitoring, spending data as well as analytics.
In fact, you can issue an unlimited number of virtual Volopay cards for any purpose you want, completely free of cost.
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FAQs on business prepaid cards
A prepaid card is loaded with funds in advance, while a debit card is linked to your bank account and deducts funds directly from the same account when used for purchases.
There can be several different types of prepaid cards that businesses use. The most common types are single-use prepaid cards and recurring payment cards. Additionally, they can also be used as travel cards, gift cards, departmental cards and so much more.
Yes, some prepaid card providers do allow ATM cash withdrawal facilities.
The process of obtaining a business prepaid card can vary among providers, but in general, it can be acquired by completing an online application form or by directly contacting the provider that you have chosen to be the best option for your business needs and requirements.
Prepaid cards can be issued by various financial institutions, including banks, credit unions, and other licensed providers such as payment processors and money service businesses.