Explore the advantages and disadvantages of prepaid cards to find the best solution.
Prepaid travel cards are not only convenient for business travelers, they’re also a game-changer for the company. Using preloaded travel cards comes with a raft of benefits, not least of which is the ability to maintain control over budgets. Read on to learn more about the advantages and disadvantages of prepaid cards, as well as the factors to consider when selecting the best option for your business.
A prepaid card for business is a type of travel card that a company preloads with money before employees use it. It offers a cost-effective, convenient way to manage business travel expenses. Prepaid payment cards come in virtual and physical formats. Once loaded with approved funds, business travelers can use these cards up to the set limit. When funds are depleted, the company can top up the balance as needed, giving full control over budgeting.
How does a prepaid card for business differ from a corporate credit card or debit card? While debit cards are linked to bank accounts and credit cards are linked to lines of credit, prepaid travel cards stand alone. This makes them useful for small businesses and startups that may not qualify yet for corporate credit cards.
A primary 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 directly through the card provider’s website or app.
Once the card’s been 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 gives the advantage of agreed-upon exchange rates, useful when employees are travelling to multiple countries.
You’ll also find prepaid cards in your home currency, whether that’s in pounds, dollars, or euros. While these can be used abroad, they’ll be subject to currency fluctuations.
There are different types of prepaid cards for business, but generally you’ll be able to do everything with a prepaid card that you would with a regular company credit card. They can be used for cash withdrawals, online purchases, and to pay for travel expenses including 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 carefully when selecting a provider for your business, so that you avoid paying exorbitant fees that can derail a carefully planned travel budget.
Advantages of prepaid cards extend beyond their convenience for travelling employees. They also provide businesses with a way to manage company spend on 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 a prepaid credit card for travel, 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 expense categories such as food and accommodation.
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 facilitates more accurate expense tracking, as transactions are updated in real-time without costly manual error.
Receive alerts in real-time when business 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 reimbursement with digital records of expenses. Some prepaid cards, like Wise and Equals Money, come with mobile apps that allow users to upload photos of receipts on the go, with notes, and submit them directly to accounting.
When you choose multicurrency accounts from providers like Revolut and Wise, you can save money on the cost of foreign currency exchange and transactions. With regular credit cards, these can often add 2% to 3% of total purchases. However, it’s always important to compare fees carefully as some prepaid cards come with additional costs.
Prepaid international credit cards reduce the need to carry cash in many countries, keeping your employees safe. Cards come with in-built security features to reduce the chances of fraudulent transactions. Travel admins can sign up for automated alerts regarding suspicious transactions. Freeze cards with a click if they’re lost or stolen. You can also opt for PIN-protected options for a greater layer of security.
While there are numerous benefits, it’s also important to be aware of prepaid card disadvantages.
For businesses, the primary downside of prepaid travel cards are the fees, which in some cases are higher than a comparable travel debit card or credit card. It’s vital to read the fine print as you may be charged a transaction fee every time an employee makes a purchase. Prepaid card disadvantages include costs like:
While corporate credit cards are widely accepted internationally, prepaid travel cards aren’t accepted by all merchants, particularly if the card issuer isn’t well known.
Supplying a preloaded travel card for business expenses works best when these expenses are predictable. If the budget for an upcoming trip relies on some guesswork, travelling employees could be caught short by hidden costs. It’s best to sign up for automated alerts for careful balance monitoring to avoid these prepaid card disadvantages.
As with any payment type, there is a slight risk of prepaid card fraud. Because prepaid cards aren’t directly tied to corporate bank accounts or lines of credit, it’s possible for fraudsters to use stolen card numbers to make purchases.
When comparing prepaid international credit cards, keep foreign transaction fees in mind. Some will charge additional fees for international use, including foreign ATM withdrawal fees.
Yet in many cases they offer savings. This is because prepaid multicurrency cards offer a secure, convenient way to navigate the fluctuations of foreign currency exchange rates. With this type of prepaid international credit card, businesses can load it with the funds needed, in the destination’s currency, before their employees arrive. This negates the need to deal with foreign exchange bureaus or banks while travelling, along with their associated processing fees.
There’s a vast range of options on the market when it comes to prepaid business travel cards. It’s important to compare your options carefully to maximize their advantages. Here are a few key factors to consider in your comparison:
While the best option will depend on your company’s size and travel 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 expenditure. 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, realistic travel budget, turn to travel management tools like Booking.com for Business. You’ll be able to compare flights, accommodation, and car rental costs in advance with loyalty discounts applied. Make travel payments for accommodation in advance, and preload travel cards according to per diem rates. By following these steps, you’ll be able to save money and exercise greater control over travel expenses.
Having the right business travel payment solution is key to managing expenses and keeping business t...
Are virtual cards the next best practice for corporate travel? Secure, seamless payments with lower...
Optimize your business trips, streamline your processes, and make your organization more efficient w...
