Explore the advantages and disadvantages of prepaid cards to find the best solution.
Prepaid travel cards aren’t only convenient for business travelers but also a game-changer for the company. Using preloaded travel cards comes with lots of benefits, including the ability control budgets. Keep reading to learn about the pros and cons of prepaid cards, as well as the factors to consider when picking the best option for your business.
A prepaid card for business is a card that a company loads with money before their employees use it. It offers a convenient and cost-effective way to manage business travel expenses. Prepaid cards come in virtual and physical formats. Once loaded with approved funds, business travelers can use them up to the set limit. When funds are depleted, the company can top up the balance as needed, giving them control over budgeting.
How does a prepaid card for business differ from a corporate credit or debit card? While debit cards are linked to bank accounts and credit cards to lines of credit, prepaid travel cards stand alone. This makes them useful for small businesses and start-ups that might not qualify for corporate credit cards yet.
A big benefit of prepaid cards is their simplicity. The company loads funds onto the card up to a set limit. These funds can be added with the payment method of your choice, usually through the card provider’s website or app.
Once the card is preloaded with funds, an employee can use it for approved expenses. You’ll be notified when the balance runs low.
While most prepaid travel cards can be used for domestic and international travel, multicurrency options provide the additional benefit of loading multiple currencies onto a single card. This comes with the advantage of agreed-upon exchange rates, useful when traveling to multiple countries.
You’ll also find prepaid cards in your home currency, whether it’s dollars, pounds, or euros. While these cards can be used abroad, they’ll be subject to currency fluctuations.
There are different types of prepaid cards, but generally you’ll be able to do everything with a prepaid card that you would with a regular credit card. They can be used for cash withdrawals, online purchases, and to pay for travel expenses like business flights, hotels, and meals. The main difference is that your company won’t be using or building credit.
Yes, prepaid travel cards usually come with transaction fees. It’s important to compare fees when selecting a provider for your business, so you can avoid paying steep fees that can derail travel budgets.
Advantages of prepaid cards go beyond convenience for traveling employees. They also give businesses a way to manage budgets for travel expenses. Here’s a rundown of the main benefits of prepaid cards.
Prepaid systems can make expense tracking more efficient. By providing employees with prepaid travel cards, you’ll be able to set limits according to your per diems and budget. Encourage compliance with company travel policies by deciding who can spend what and where, with preapproved limits for different categories like food and accommodations.
Another key benefit of prepaid cards is seamless integration with your business’s accounting software. Providers like Soldo and Wise integrate directly with Xero, for example. This enables more accurate expense tracking, since transactions are updated accurately in real-time.
Receive alerts in real-time when travelers are approaching their spending limits. You’ll be able to schedule regular top-ups based on company policy and associated spending rules.
Prepaid cards streamline travel expense reporting and reimbursements with digital records. Some prepaid cards like Wise and Equals Money come with mobile apps that allow users to upload photos of receipts with notes, then submit them directly to accounting.
When you choose multicurrency accounts from providers like Revolut and Wise, you can save on currency exchange and foreign transactions. These can often add 2% to 3% of total purchases with regular credit cards. However, it’s always important to compare fees carefully because some prepaid cards come with additional costs, too.
Prepaid international credit cards reduce the need to carry cash in many countries, keeping your employees safe. Cards also come with security features that prevent fraudulent transactions. Travel admins can sign up for automated alerts for suspicious transactions. Freeze cards with a click if they’re lost or stolen. You can also opt for PIN-protected options for even more security.
While there are lots of benefits, it’s also important to consider the disadvantages of prepaid cards.
For businesses, the main downside of prepaid travel cards are the fees, which in some cases are higher than those of debit or credit cards. It’s important to read the fine print, or you might be charged a transaction fee every time an employee makes a purchase. Other disadvantages could include costs like:
While corporate credit cards are widely accepted internationally, prepaid travel cards aren’t always accepted, especially if the card issuer isn’t well known.
Preloaded travel cards work best when the expenses are predictable. If the budget for an upcoming trip relies on some guesswork, traveling employees could come up short on hidden costs. It’s best to sign up for automated alerts to avoid any surprises.
As with any payment type, there’s a slight risk of fraud when it comes to prepaid cards. Because they aren’t directly tied to corporate bank accounts or lines of credit, scammers can use stolen card numbers to make purchases.
When comparing prepaid cards, keep foreign transaction fees in mind. Some will charge additional fees for international use, including foreign ATM fees.
Yet in many cases they provide savings. This is because prepaid multicurrency cards offer a secure, convenient way to navigate the fluctuations of foreign currency exchange rates. With prepaid international cards, businesses can load the necessary funds in the destination’s currency before employees arrive. This precludes having to deal with currency exchanges or foreign banks while traveling, along with their processing fees.
There’s a wide range of options when it comes to prepaid travel cards. It’s important to compare your options carefully to maximize their advantages. Here are some key factors to consider:
While the best option will depend on your company’s size and needs, here are some popular travel cards to consider.
With global spending on business travel hitting nearly $1.5 trillion in 2024, organizations of all sizes are looking for ways to optimize expenses. Make the most of your corporate travel expenses with these prepaid card tips:
Financial forecasting goes hand in hand with prepaid card tips. When it comes to crafting a compliant and realistic travel budget, turn to travel management tools like Tripeden.com for Business. You’ll be able to compare flights, accommodations, and car rentals in advance with loyalty discounts applied. Make travel payments for accommodations in advance, and preload travel cards according to per diem rates. By following these steps, you’ll be able to save money and exercise more control over travel expenses.
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