What are prepaid cards?
What are prepaid cards?
A prepaid card is a convenient way of having access to funds, in the same way that you would with a debit or credit card, but without the risk of overspending. For businesses great and small and for public sector organisations, prepaid business cards streamline expenses, reduce risk and significantly improve management control of overspending.
How do prepaid cards work?
- The employer can load the employee’s prepaid company card with enough cash for their expenses. The employee can, depending upon any rules that may have been set, buy items online, book travel, pay for taxis and also use the card for minimal amounts – a cup of coffee or a sandwich.
- Alternatively, they can use it to draw cash from an ATM, as you would with a debit card, however, unlike a debit card, prepaid debit cards are not linked to a bank account. They are virtual company cards that can be pre-loaded with funds at the convenience of the employer.
- Once the amount on the card is spent, it can only be reloaded by the business. Cards are issued by the Mastercard or Visa networks.
- A prepaid card brings transparency and immediacy to the tracking of expenses. The card transmits the data detailing the spending amounts to an online system which provides real-time information for the finance team.
- Connect this with Xero, or export the information to your accounting system, and you have eliminated expense claims, manual receipt processing and payment of claims. You’ve also relieved your staff of the burden of spending their own money and waiting for reimbursement.
To learn more about prepaid business cards, check out our guide to prepaid cards for business and find out how our unique business solution can help your company better manage expenses.
Benefits to employees
- Prepaid cards can be a win/win for both employer and employee when it comes to company spending.
- Many employees currently face having to spend their own money on work-related expenditure. After waiting for an expenses form to wind its way through the finance system, they often have to wait even longer for a payment run from the accounts system to get the cashback.
- A prepaid business card gives employees financial autonomy and dispenses with the unreasonable expectation that they spend their money on behalf of the company. Employees will feel trusted and valued and employers can be confident that they will maintain a secure grasp of expenditure.
- The cards are also useful in a business with young employees, including those who are under 18 who are trusted to make smaller purchases. Whereas you have to be 18 to have a business credit card, you can be issued with a pre-loaded card at any age.
- Prepaid cards are a useful way for the employer to stratify expense management among staff. New or junior employees can be given a card with a low limit until they prove that they handle the spending responsibly.
- As there’s no credit facility on a prepaid card, they can’t be used to accumulate debt, so a rogue employee can’t go wild with a company card.
- Moreover, if the employee loses the card, unlike a credit card, the company can immediately block the card. This makes prepaid cards a secure way to manage expenses and prevent unauthorised payments than reliance on a debit or credit card.
Use of the cards is growing
The benefits of these cards are becoming ever more widely accepted, and their use is growing both in business and among consumers. A generation that has grown up with online and plastic everything is now beginning to use them as a basic account alternative.
Mobile phone use for payment
- For senior employees, a credit card may still be needed, however, by supplementing the credit card with a prepaid card, small items such as drinks and snacks can still be processed through an ultra-efficient expense management system. These cards are also available in different currencies, for use on foreign trips, meaning they can be used both locally and abroad. Prepaid business cards eliminate the need for forex business cards, meaning employees only have to carry one card instead of two when travelling. An employee can also use a mobile app to send a business expense receipt off to the admin interface, a convenient way to monitor the expenditure of employees travelling abroad.
- This technology is being widely adopted by governments and councils, for paying benefits and other uses. This is good news for businesses because it means the cards have become widely accepted and used and are no longer a “niche” method of payment.
- In fact, all of the developments in credit and debit cards, such as contactless technology, are also being offered in prepaid cards.
- To see how a modern expense management system uses prepaid cards and mobiles to deliver efficiencies at every stage of the expense cycle, simply contact Soldo – we are market leaders in this technology.
Are prepaid cards safe?
- Most prepaid cards are Visa or Mastercard based and have the same security safety net as debit and credit cards.
- Like a debit or credit card, prepaid cards require the use of a pin number in order to make purchases over £30 or withdraw cash.
- When shopping on the internet, if you were to access a site infiltrated by hackers, you run the risk that your debit or credit card could leave your bank account vulnerable to scams. A prepaid card has no link to your bank account and in this sense it is anonymous.
- A prepaid card is far safer than carrying cash. If it is lost or stolen a card can be instantly deactivated. Carrying cards linked to your bank account puts your account at risk. There is no such risk with a prepaid card.
Can prepaid cards be used online?
- Prepaid cards are an ideal way to pay for goods, services or subscriptions online. They are safer to use than credit cards or debit cards.
- You can link your prepaid card to Apple Pay or PayPal for added convenience.
- Most prepaid cards can be added to Uber accounts. This makes them a convenient way to manage personal commuting expenses or provide employees with a traceable means of travel expenses, either in the UK or abroad.
- Prepaid cards are an increasingly popular choice for travellers abroad. The big advantage of using a prepaid card abroad is that you don’t pay any foreign exchange fee. The exchange rate is fixed at the point at which you load the card with the currency of your choice.
Prepaid cards for business
- Prepaid cards enable businesses to provide the full range of their employees, from junior to senior, with an expenses account appropriate to their needs. Budgeting can be much more tightly controlled because expenses are no longer open ended. The use of the app provides real-time traceability of expenses even when colleagues are travelling overseas.
- The payment control dashboard gives you complete real-time monitoring of expenditure. You can even add rules and limits and define how and where employees use their cards.
- For employees travelling abroad, a prepaid card is a great choice, not only a convenient way to access the local currency it is also a much cheaper one. Using a debit or credit card abroad will incur foreign exchange fees with every transaction but with a prepaid card the exchange rate is fixed when the card is loaded and there are no further fees for any transactions.
Prepaid cards advantages
- Security. Prepaid cards are not linked to a bank account and therefore a business or personal bank account cannot be hacked through them.
- Budgeting benefits. Whether it’s for a family holiday abroad or business entertainment expenses, a prepaid card is a secure way to monitor expenditure. You cannot spend what isn’t there, nor can your employees.
- Convenience. Anything you can do with a credit card or debit card you can do with most prepaid cards, but without placing your personal or business bank account at potential risk.
- Traceable. Everything spent on a prepaid card can be traced by the holder, but no transactions can be traced back to your bank account by hackers.
- Employee autonomy. Employees no longer have to claim back expenses. They will feel valued and trusted and the employer can feel confident that they have a comprehensive overview and complete control.