The complete guide to prepaid cards for businesses

1. The basics

Let’s start with a definition: what is a prepaid card? Simply put, it’s a payment card onto which you load a certain amount of money, and then make payments with that card up to that pre-set budget. Then you top up the balance or transfer more funds as needed. So it can be used similarly like debit or a credit cards, but it isn’t linked directly to a bank account.

In fact, the primary appeal of prepaid cards is in the ways that they differ from business credit cards. Because prepaid cards aren’t linked directly to a bank account or credit facility, there’s no interest added to purchases, and there’s no accumulation of debt. And because you’re not asking for credit, prepaid cards are much easier to get hold of.

That last point is crucial. Many small businesses are turned down for business credit cards because they’re relatively new, so prepaid cards become a much more accessible option.

Even if you have (or are eligible for) a business credit card, there are still many good reasons to embrace prepaid business cards.

As this guide will show, prepaid cards can be a game changer when it comes to expense management, and they’re an excellent way to empower employees with controlled access to company money.

Prepaid cards and fees

With prepaid cards increasing in popularity, providers are trying to stand out from the crowd and offer packages that are unique in their field. As such, not all prepaid cards for businesses are the same.

For a start, different issuing companies charge different fees. As you embark on your prepaid card journey, it’s worth taking a moment to learn about the landscape of fees, because it should influence your choice. Typical fees include:

• Top-up fees: a fee charged when you add funds to a prepaid account.
• Monthly fees: a management fee charged every month.
• Application fees: a fee charged for issuing the card.
• Withdrawal fees: a fee charged for ATM withdrawals.
• Transaction fees: a fee charged every time you use the card (for example, 3% of the value of a purchase).
• Inactivity fees: a fee charged if you haven’t used your card for a period of time.

Most cards charge a number of these fees, so different cards will be more suitable for different businesses, depending on what you use them for.

Minimums and maximums

With prepaid cards there can be various thresholds you’re expected to adhere to. For example, many providers specify a maximum amount you can hold on a prepaid card, which could be anything up to £25,000. Some have minimum balance requirements, typically £50 or £100, and they can also include a maximum daily transaction cost or a maximum single purchase value. Much like fees associated with prepaid cards, minimums and maximums will affect your decision too.

Are you eligible for a prepaid card for business?
The answer to this question is almost certainly yes. As we mentioned previously, prepaid cards are generally more accessible than credit or debit cards. Proof of identification is all you’ll usually need to provide, alongside some basic company details, and there’s no need to share your credit history.

What to look for in a prepaid card for business?
The best card for your business will depend on how you’re planning on using it. Here’s a few factors to consider:

• Costs: base your calculation of cost on your likely usage. Of course, compare the various fees, but also consider how frequently you or your employees are likely to withdraw cash or travel abroad. Pick a provider with fees that best suit your anticipated requirements.
• Number of users: how many cards does your business need? Make sure a provider will issue enough cards at a reasonable cost. Also look out for minimum card spends.
• Features: look for management tools that offer control. For example, do you want to restrict spending by category, such as travel, food, and entertainment? Would it be useful to be able to monitor spending in real-time? Do you want the option to top-up cards automatically? The best solutions offer these features and more.

2. Why use prepaid cards?

Prepaid business cards aren’t just a last resort for those who can’t get credit. In fact, many companies now use prepaid cards alongside a company credit card, and there are a number of features that a good card issuer will provide.

Convenience and security

Paying by card is convenient, and some prepaid card providers also issue virtual cards for online purchases. The controlled allocation of real money makes budgeting easy, with no risk of nasty surprises at the end of the month. It’s also reassuring to know that your business can never lose more than the amount loaded onto the cards.

Most prepaid solutions also give you the option to turn cards off with a click. A lost, stolen or fraudulently used card can be deactivated in seconds.

Easier travelling

Employees who need to travel can get a prepaid travel card (also known as a cash passport) to make the costs associated with international travel easier to manage. As well as expenses like accommodation and food, prepaid travel cards are useful when it comes to the unforeseen costs of a trip. These cards are also compatible with multiple currencies, and eliminate the need to carry wads of cash.

However, be sure to check what the foreign exchange fee is when researching a prepaid card. With Soldo Pro and Premium, for example, the charge for currency exchange services is fixed at 1.00% above the latest available interbank rate.

Give employees freedom

Allocating prepaid cards to employees gives them the autonomy to make purchases at their discretion, while you decide budgets, so there aren’t any unexpected outgoings. Significantly, it also means that employees won’t have to spend their own money on the company’s behalf.

Making employees pay for business expenses from their own pockets can leave them frustrated at least, and even in financial difficulty. The best prepaid cards give employees freedom to spend company money within a pre-established limit.

The downsides of prepaid business cards
Prepaid cards are a useful tool for many businesses, but they do have downsides:

• Fees: pick the wrong card and a plethora of small fees can quickly add up.
• Credit: you don’t improve your credit rating by using a prepaid card.
• Rewards: credit card style reward schemes are not available on most prepaid card platforms.

Although these downsides are worth knowing, the pros of prepaid cards far outweigh the cons, and prepaid cards can help to push your business forward. First, choose a Soldo Prepaid Card that fits your business.

3. Prepaid cards vs credit and debit cards

When researching prepaid cards, you may see the term ‘prepaid debit card’ or ‘prepaid credit card’ used. They both mean the same thing, it’s just a matter of semantics. However, when compared to traditional credit and debit cards, there are varying differences.

Prepaid vs credit cards

The most obvious advantage prepaid cards have over credit cards is one we’ve already mentioned: it’s much easier to get an account because a credit check isn’t necessary.

And with a prepaid card, you never risk debt spiralling out of control.

Research shows that people find it easier to spend excessively on credit cards than with cash, and prepaid cards are much closer to cash. When the loaded sum is spent, it’s spent.
You are also spending company money that already exists, rather than building up debt that will need to be paid off in future. If multiple employees are spending money on your company’s behalf without limits, it’s easy to rack up debt.

Prepaid cards vs debit cards

Prepaid cards offer a couple of key benefits over debit cards as well.

For starters, the spending is risk-free. It can be dangerous to issue multiple employees with debit cards, especially if you have an overdraft facility. Having direct access to a bank account will always be less secure than having a pre-set limit.

Another bonus of loading cards with preset amounts is that you make accurate budgeting easy. You can get a real-time view of spending, which isn’t always possible with debit cards.

4. Prepaid cards as a business tool

Prepaid cards are as much a management tool as a spending system. They allow you to take control of your business spending and focus it in more productive ways.

Controlled spending

The best prepaid systems come with features designed to make your financial processes as efficient as possible. These include:

• Customisable spending rules and limits. You decide who can spend what, where, and when, and apply those rules to individuals, teams, or entire departments. You can set limits for categories (like travel, training, or food and drink) and/or daily spending limits.
• The ability to approve or prevent online or contactless transactions, and limit or prevent cash withdrawals.
• The ability to turn cards on and off at will.

It’s proactive expense management at your fingertips. Get started here.

Accounting software integration

Many prepaid cards integrate seamlessly with accounting software, making the lives of your finance staff easier. Soldo integrates directly with QuickBooks and Xero, for example.

Manual data entry is error-prone, leading to inaccurate records and missed VAT deadlines. Prepaid card management systems automatically send data to accounting software, which results in more accurate accounts. And they can be reconciled in just a couple of clicks!

Streamlined finances

Prepaid cards give you greater visibility on your spending, as well as the insight you need to spend more wisely. A couple of features that are extremely useful for managing business spending are:

• Real-time monitoring
  This means expenditure can never get out of control. Because you set the spending boundaries, you always know the nature of your cash flow, and mobile apps mean you can control that cash flow from anywhere. Sophisticated platforms will also inform you if spending limits or rules are close to being broken, allowing you to take remedial action.
• In-depth reporting
  This gives you actionable insight into how your business spends money. Filter by user, currency, period of time, and more. Find more cost-effective alternatives for recurring expenses. Intuitive dashboards and useful visuals give you the clearest understanding of where your money is going and where savings can be made.
• Automated processes
  Prepaid cards can automate many time consuming processes. You can create automatic reloads for specific cards based on your rules and timings. For example, staff who regularly entertain clients don’t want to be embarrassed by running out of money at the wrong time. Spending rules are automatically applied, freeing you from the burden of overseeing countless trivial spending decisions.

Happy staff

Prepaid cards don’t just make life easy for you, but for your employees as well:

• Staff don’t have to spend their own money on the company’s behalf. When this is the case, some of this expenditure often goes unclaimed, and Soldo estimates that the approximate value of items that haven’t been claimed back in the last 12 months by SME workers across the UK is an enormous £137million!
• Employees no longer have to carry around paper receipts. Cards with an associated mobile app let staff snap photos of receipts, add notes, and send them off to the accounts department. No more wasted time filling in manual expense reports.
• Giving employees the freedom to spend company money creates a sense of trust, and encourages staff to spend wisely.

5. How Soldo can boost your business

Soldo’s prepaid Mastercard® offers all the benefits we’ve mentioned in this guide.

Our cards let you take control of company spending while simplifying expense reporting. Soldo’s spend management platform offers great money-saving insight and makes bookkeeping effortless with accounts software integration.

Soldo’s prices are straightforward. There are no hidden deposit or transaction fees and we don’t insist on a minimum number of cards or a minimum deposit. Our foreign exchange fee is fixed at just 1% for Pro and Premium plans. There’s just a small monthly fee per card for Pro and Premium plans.

Signing up is easy and you can order as many cards as you’d like. You can have a virtual card up and running in less than one working day, and physical cards in less than five. Upgrade to Soldo today and optimise your business’ finances.