Prepaid business credit cards

Prepaid business credit cards
Luke Loftin
on March 22, 2020
Read in 10 min

Prepaid business credit cards can have a number of advantages. For one, it can make sure you limit and fully control the amount being spent by the holder or holders of the card. It also presents less risk for virtually all parties involved. For the lender or card issuer supplying the card, it offers lower risk because there is only a set amount of money that can be represented on them. Because they are prepaid, the issuer often does not even need to worry about getting their money back – they have already received it before the card was even issued. In many ways, a prepaid business credit card actually functions more like a debit card. If you or your business are considering using prepaid business credit cards or debit cards as an option, this article will provide some tips and details to keep in mind.

Differences between prepaid cards and other cards

There are some important distinctions between the various different types of cards a business may use to conduct transactions. For example, there is a difference between:

  • A prepaid debit card or prepaid credit card
  • A checking account debit card
  • A regular credit card.

Each different type functions on different rules, regulations, and abilities. So it’s important to consider all the different options before making a decision about which type of card your business needs for a given situation.

A debit card that is attached to your business’s checking account may come with more risk than a prepaid card, for example. That’s because, since the card is connected to your business’s primary checking account, you run the risk of potentially overdrawing your business account. While that situation may be unlikely depending on how much funding your business has in the primary checking account, it’s still worth thinking about. Do you, as a business owner, want the cardholder to have access to all of the business’s funds? That’s what you get when you distribute a checking account-linked debit card. The only limit to such a card is the amount of funding in the checking account. Whereas a prepaid card has a set limit imposed on it from the start, so there is less potential risk involved.

And a business credit card, on the other hand, carries even more potential risk, depending on the terms. A credit card is basically like borrowed money. It has a line of credit that revolves based on when you pay off the balance. This means that if you don’t pay off the balance, the card will eventually become maxed out, and you will no longer be able to use it. In that sense, a regular credit card is similar to a prepaid card, in that there is a set limit on how much can be spent.

prepaid business credit card

But unlike a traditional business credit card, a prepaid card usually won’t have an interest rate attached to it. That’s because the money was provided up-front, so the card issuer isn’t assuming any risk by lending money that hasn’t already been paid. Prepaid cards and traditional cards do have another similarity as well. Many prepaid cards may be affiliated with major brands like Visa or Mastercard, which means they may be accepted at many of the same institutions as these brands’ traditional credit cards. This can be advantageous for businesses who need to make purchases at a variety of different locations. As opposed to a specialty card, like a gas card or a grocery store card, which can only be used at certain stores or businesses.

Advantages of prepaid cards

There are a number of potential advantages for a business choosing to use prepaid cards to make purchases and transactions.

  • For one, it offers increased control over employee spending. Since prepaid cards require preloaded funds before they can be used, it makes it far easier to keep a close watch on employee spending with strict limits. Even for a business that trusts its employees, this strategy can help keep the business on a budget and avoid spending too much on things that aren’t necessary or expected.
  • Plus, prepaid debit cards or prepaid credit cards may be issued without a credit check. This can be especially good for new businesses or startups who don’t have an established credit history but still need to make purchases at a variety of different locations.
  • And because many prepaid cards come from major brands, some of them can be integrated into accounting software, which can help business owners keep track of expenses and purchases.

The structure of prepaid cards may offer less flexibility, but overall it can offer more control and oversight.

Potential disadvantages to using prepaid credit cards or prepaid debit cards

Unfortunately, because prepaid cards are fairly restrictive in their use, they may also come with a set of potential disadvantages, depending on the card issuer and their policies. For example, some cards have strict limits about the maximum amount of funds you can place on the card. These may range from a few thousand dollars to much higher, or even lower. It really all depends on the individual card and the terms, so make sure to do the right amount of research before selecting a card for your business.

And some cards can’t be used at an ATM, which is an important feature to make note of as you go about your search for the right prepaid card. If you think you’ll need to make cash transactions with your card, make sure you can use it to access ATMs, otherwise, you’ll be out of luck. Some cards do allow you to set a pin and withdraw cash, but some do not. So be careful before you proceed with loading up the card.

Still, some cards may have even more restrictions. Some companies offer “virtual cards” which only exist online, with no physical card to carry around. This may have some fringe benefits, however. For example, you won’t have to wait for a card to show up in the mail, and there’s no chance of losing it. But obviously, such cards come with certain ways they can be used and ways they cannot.

prepaid business card

A virtual card could really only be used to make online purchases. This might be satisfactory for certain businesses or employees making primarily online purchases. But you won’t be able to buy gas or go into a store with a virtual card, so keep that in mind if you’re considering this type of option. A virtual card also eliminates the need to keep physical receipts, however, as each transaction is recorded online. This can make record-keeping easier, and there’s no risk of losing physical receipts. But again, these virtual cards come with a fair amount of restrictions, so you should think long and hard about what you’ll be using the card for before agreeing to fund a virtual prepaid card.

Some cards may also have minimum balance amounts. This might not be a problem for bigger businesses with a large amount of funds, but for smaller new business or start-ups, they might not be able to meet the requirements for certain cards. Not to mention, some cards come with monthly fees that you’ll be required to pay if you want to keep using the card.

When should I use a prepaid business credit card or debit card?

There are a number of situations and reasons why a prepaid card might be right for business. For businesses who regularly hire freelancers or contract employees but also need these employees to make purchases, a prepaid card can be an ideal option. That’s because prepaid cards help you limit spending and keep a strict eye on the amount of funds being used for purchases. Even if the worst case scenario should happen and the card gets stolen or lost, if the balance on the card was small, the damage will be minimal.

So, what cards are out there?

PayPal Business Debit Mastercard

PayPal is largely known as an online money management system, but they also offer credit cards and a business debit card as well. This card comes with a number of notable features, including zero monthly fees and no charge for setup. However, like any card, it comes with some restrictions. For example, you can only have two cards total, which might not make it ideal for bigger business who need to issue multiple cards to different employees. There are no minimum balance requirements or maximum balance restrictions. But there is a fairly rigid daily spending allowance. All in all, this card might be best for small business owners who are just starting out, like new businesses or startup companies. The daily spend maximum limit is just $3,000 per day. This may be fine for some companies, but if you intend to use this card to make multiple large purchases every day, you might not be able to.

One positive feature of the PayPal card is that if you already have a PayPal account, you can easily transfer funds from there directly onto the card. And it also offers a cash back rewards program of 1% on eligible purchases. Certain terms apply, so make sure to read everything carefully before you decide to go with this card (or any card, for that matter.)

PEX Prepaid Visa

The PEX Prepaid Visa has a relatively high monthly fee, which is one of the reasons why this card is probably more ideal for bigger businesses than smaller ones. There’s also a $49.95 setup fee, so getting this card ready to go can be a bit pricey. The monthly fee is $75 for the “Core” version (although you can also get the “Core” account for $8 per month per card if you’re a smaller business) and $200 for the “Pro” package. One of the advantages of this card is that it offers 100 or more employee cards per account, so if you need a large number of cards for your workforce, this is a card you might want to consider.

While there is no minimum balance requirement for each card, the total in your PEX account must be at least $50. Each card has a $25,000 maximum, but there is no limit to the amount of funds that can be kept in the PEX account. There is no limit to how much you can load onto the account each day, but individual transactions cannot exceed $25,000.

Clearly, this card is designed for bigger businesses with more money to spend. If you’re looking to make large purchases or authorize cards for a vast number of employees, this card could be an efficient option. There are other terms and conditions, of course, so make sure to read the details carefully if you decide this card might be the option for you.

Bento for Business Visa

As with many of the cards on this list, the Bento for Business prepaid card offers various different pricing ranges, depending on how many cards you agree to purchase for your business. The first two cards are free, but from there you will have to pay monthly fees for more. Anywhere from 3 to 10 cards means you’ll be paying $29 each month. If you bump it up to anywhere from 11 to 25 cards, the fee jumps to $69 per month. And if you want to shell out $149 each month, you’ll be entitled to an unlimited number of cards.

But there is a way to avoid these monthly charges. If your business spends more than $20,000 every month, they’ll waive the fees.

If you’re considering this card, it’s important to know some of the requirements as well. For example, you’ll need to make a minimum initial deposit of $10. After that, however, there is no minimum balance requirement you’ll need to maintain. And there is also no maximum limit to the potential balance.

However, there are some spending limits to keep in mind. The most you can spend daily with a Bento for Business card is $25,000 per day. And the person in charge of the account can opt to lower this limit on each card if he or she chooses. You’ll also only be able to get $500 cash back and make $500 maximum cash withdrawals per day. So it might not be the best card if your business will need to take out large amounts of cash daily.

NetSpend Small Business Prepaid Mastercard

For businesses that are somewhat smaller in scale and are looking for 10 prepaid cards or fewer, the NetSpend Small Business Prepaid Mastercard might be an option to consider. For one, there’s no startup fee, which minimizes the total cost. And the monthly fees are fairly inexpensive. The first card has a monthly fee of around $9.95, with an additional $1.95 for each card up to 10. The cards can be used at ATMs, which make them a good option for businesses looking to make cash withdrawals. And the ATM fee is relatively small, at just $2.50 per transaction.

However, one of the downsides is that the maximum spend amount per card per day is only $5,000. For some businesses, this may not be a problem, but for larger businesses making more high-dollar purchases and transactions, it may not be enough. And the maximum account balance tops out at $25,000. Again, for smaller new business or startups, this setup might be a good option. But if you need a higher limit or more spending power, you may want to consider other options.

Emburse Prepaid Mastercard

SImilar to other prepaid cards we have covered, the Emburse Prepaid Mastercard offers two different versions of their program, which each come with different levels of pricing and fees. The pricing structure on Emburse is somewhat unique. You pay per user, rather than per card. The “Starter” tier is $50 per month in fees and includes up to 10 cards. But if you want multiple users, the “Business” tier charges $7 per month per user, with unlimited cards available per user account. However, there are user-specific features, so while it may seem like a cost-effective method to register a single user account with unlimited cards, you’ll be missing out on certain features. Some of these user-specific features include deductions, budgets, and purchase requests. For the most flexibility, having multiple user accounts may be needed, depending on the requirements of your business.

Fortunately, there is no setup fee for the Emburse Prepaid Mastercard. However, you won’t be able to access cash from ATMs. So if your business requires cash purchases or withdrawals, you might not want to go with this option. As for minimums and maximums, Emburse offers fairly flexible terms. There is no minimum balance requirement and no maximum limit. There is, however, a limit on the dollar amount for each individual transaction, and that is $100,000. Still, that’s a relatively high limit, giving this card a high ceiling when it comes to making business transactions.

Emburse also offers virtual cards, which come with optional features of their own. The virtual cards can be loaded with set spending limits, time restrictions, and categories, plus you’ll be able to activate or deactivate the cards with a single click. This card seems best suited for a larger business who require a great degree of control and flexibility with their purchases, but even the right small business might find the Emburse Prepaid Mastercard to be a useful option under the right circumstances.

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Disclaimer: This is not legal or financial advice. Please consult a legal or financial advisor for your specific situation.

Luke Loftin Finance Journalist

Luke is a writer and editor based out of Los Angeles.

He specializes in finance, as well as health and wellness.

In his free time, he enjoys watching Astros baseball.

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