Finding the best prepaid card for your business
Prepaid cards are used by many businesses. With our guide, you’ll learn about how they work and what to look for to get the best deal.
What are business prepaid cards?
Prepaid business cards are cards that can be preloaded with money that employees within a company can use to make business purchases and pay for other expenses.
These cards are typically linked to a single business bank account from which the funds are usually taken.
The cardholders are unable to go over the balance preloaded on the card. This can make it simple for business owners of all sizes to manage their business expenses.
What are prepaid company cards used for?
Prepaid business cards are primarily used to give employees within a business access to company funds to pay for items or services they may need.
When issuing company credit cards, you’ll want to keep the number as low as possible. It’s best not to give every team member a business credit card because it wouldn’t be practical.
Instead, you could give your employees a prepaid business card with a fixed limit. With this, your team won’t have direct access to the business account or credit, making it difficult to mismanage.
Most small businesses can use prepaid cards for business expenses. Instead of having staff pay for items with their personal funds and keep receipts to submit as expenses, a pre-paid company card means expenses can be paid directly, cutting out the admin involved in claiming expenses. Plus, your employees won’t be out of pocket waiting to be reimbursed.
This allows for better money management, keeps personal and business funds separate, and allows business owners to assess where their money is going in real time.
Most prepaid business cards are likely to have an app which each cardholder will have access to. Cardholders will be able to view their balance, see what they’ve spent, and request the account holder to issue them more funds from the business bank account.
Because a prepaid corporate card doesn’t use credit, there are no credit checks when you apply for them. This makes these cards popular with new or small businesses that don’t have a credit history. Because new or small businesses may not be able to get access to business credit cards yet, many turn to these prepaid cards to give their teams access to business funds.
How do I get prepaid business cards?
The most common way to get a prepaid business card is to apply for one online on the card provider’s website. You can also get one by visiting a bank branch, although not a lot of high street banks provide prepaid business cards.
Unlike when applying for business credit cards, there will be no credit check on you or your business. This means new companies or businesses that don’t have much credit history will have access to this helpful product, which can aid budgeting.
Still, to be eligible for a prepaid business card, your business will need to be registered in the UK, have started trading, and have no shareholders under 18. Business owners cannot issue prepaid business cards to anyone under 18.
Are there any fees associated with prepaid business cards?
Lots of prepaid business cards will charge fees, depending on how you use them and the provider you choose. When comparing prepaid company cards, these fees can determine the providers most suitable for your business.
When you open your prepaid business account and get issued your first set of cards, you may be subject to a delivery fee from certain providers. This fee can range from £1 to £2 per card.
If your business grows and you decide to get more cards for your employees, you may be charged delivery for each additional card.
Prepaid business cards often come with monthly fees. These fees are usually for each prepaid business account and not for each card; however, the more cards you need for an account, the more your monthly fee is likely to be.
Most prepaid business card providers offer different tiered plans, which can impact how much the monthly fees cost.
Many providers have basic plans that are free or very low cost, but these plans could have limitations on the number of cards you can have, a lower maximum balance, and other restrictions.
The more expensive plans offer more functionality, but you’ll have to review these tiered plans and work out which one best suits the size of your business.
Some prepaid business cards charge a transaction fee each time the card is used to make a purchase. The best prepaid company cards won’t charge these fees.
UK Withdrawl Fee
Prepaid business cards can be used to withdraw cash from a cash point. However, there will likely be a fee for every withdrawal, which can range from £1 to £2 per withdrawal.
This means if the employees in your business are withdrawing cash often, it can increase the costs of using these types of cards.
International Withdrawl Fee
A prepaid corporate card can be a good solution for employees on foreign business trips to pay for expenses when abroad. However, for this to be the most effective, you’ll need to find a prepaid card with the lowest international withdrawal fees.
Typically, some of the leading prepaid business cards will charge international withdrawals of £2-£3 per transaction.
Because the cards will be loaded with pounds sterling, you’ll also have to convert your balance into the local currency. Depending on the provider, you’ll likely lose out on the exchange rate, increasing your costs.
Foreign Transaction Fee
When using a prepaid business card to make payments abroad, you’ll likely have to pay a foreign transaction fee. This can either be a set fee each time, usually £3-£5 per transaction, but some providers may charge a percentage of the transaction value, ranging from 1-3%.
If your prepaid card provider charges a flat fee, it’s better to use the card for larger, less sporadic transactions. If you’re paying a percentage, this type of fee best suits more frequent, lower value purchases.
Where can you use a prepaid business card?
Prepaid business cards can be used with any merchant that accepts the payment network the card is registered with. When you get a prepaid business card, it’ll likely be powered by either Visa or MasterCard.
Providing the merchant accepts these payment networks – which the vast majority will – you’ll be able to use your prepaid business card there.
You can also use prepaid business cards at cash points to withdraw cash; however, there will likely be a fee you’ll have to pay to do this.
You can also use some prepaid business cards to make purchases online like you would for a debit or credit card.
Prepaid business cards can also be used abroad to withdraw cash or pay for items, but there are likely to be high costs associated with doing this.
What are the advantages and disadvantages of using prepaid business cards?
Prepaid company cards are valuable for businesses of all sizes and come with many benefits.
Easy to track expenses: These cards allow business owners to track where their employees are spending their allocated budget. Having expenses all on one centralised system can make it easier to manage and eliminate the need for staff to use their personal funds and submit receipts.
Eliminates the need for petty cash: Prepaid cards remove the need for staff to carry cash. Cash can be hard to monitor and is riskier to carry, so getting rid of the need to have it can help businesses keep their funds safe.
Keeps costs under control: Because cardholders can’t spend more than what’s loaded on the card, it can help keep business expenses down and make sure employees don’t abuse the business’s credit.
No credit checks: Because you’re not borrowing money with prepaid business cards, there’s no need for a credit check. This can make applications a lot easier and provide businesses with no credit history with a useful way to manage money and expenses.
Despite the benefits, there are also a few limitations to prepaid business cards that mean they may not be suitable for every business.
No direct debits or standing orders: If a member of staff has a recurring transaction they need to pay for – such as a subscription to essential software – they’re unable to schedule direct debits on prepaid business cards.
No overdraft facility: Although not being able to spend more than your budget can be helpful, not having an overdraft doesn’t allow for any leeway. If you’re just a little short on funds in the account, the transaction will not go through and be declined.
Withdrawal and spending limits: Some card providers will limit the amount and frequency you can withdraw from a cashpoint or spend at once. This may not suit businesses that need to make regular or large unplanned purchases.
Expensive fees: Prepaid business cards can come with many fees that can quickly add up. The monthly fee for keeping the account open can be pretty large with some providers, depending on the plan you choose, and additional fees can make using the card a costly luxury.
Prepaid business cards FAQs
Can I use my prepaid business card abroad?
Yes, prepaid business cards can be used abroad and may be valuable for managing expenses when staff are on business trips overseas.
However, before using prepaid company cards for travel expenses, it’s worth checking to see if there are any international withdrawal fees or charges for using the card abroad. If there are, it could make this payment method an expensive option.
A standard fee for using prepaid business cards at cashpoints abroad is £1.50, but some may charge up to £5 per withdrawal. Some cards can also set a foreign transaction fee, ranging from 2-3% of the transaction’s value.
If you plan to use prepaid business cards abroad, you’ll want to find a card with the cheapest international fees.
Can I have multiple prepaid cards for my employees?
Yes, but having multiple cards can make prepaid business cards more expensive.
Some providers may have different subscription plans for their cards, and each plan could have a limit on the number of cards you can have per account. A plan that allows you more cards may make your monthly fee more expensive.
Plus, some prepaid card providers will charge you a monthly fee per card, not account, meaning having more cards may mean you’re paying more in total.
What is the difference between a prepaid business card and a business credit card?
Prepaid business cards are not credit cards because you’re not borrowing any money. Instead, you’re depositing a balance from an account onto a card to be used by employees.
A business credit card is where you borrow money on a card to pay for goods or services and then pay that amount back later – potentially adding interest if you fail to repay everything by a specific date.
To get a business credit card, your business will be subject to a hard credit check. There’s no need for a credit check to get a prepaid business card.
How much money can I put on my prepaid business card?
The amount you can put on a prepaid business card will differ depending on your plan and provider. Typically, prepaid business cards will have multiple tiered plans at different price points, with the cheaper tiers offering lower balance limits. These lower limits can range from £10,000 to £25,000.
If you’re paying for a higher tier, the maximum balance can be as high as £250,000.
However, it’s crucial to find out if this limit is per card or account, as this could affect how much you can load onto a prepaid company card. If the limit is per account, the total loaded on all the cards linked to the account cannot reach more than this total.
So if your account limit is £60,000 and you have three cards, the total balance in the cards must be under £60,000. It’s up to you if you want to divide the balance between the cards evenly (£20,000 each) or allow certain cards to have more balance than others (£30,000 on one, £20,000 on another, £10,000 on the last one.)
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