March 8, 2023

Prepaid debit cards for business—are they right for yours?

Poor expense tracking and a lack of spend controls can create a mess for both your finance team and company as a whole. One way to avoid these pitfalls is with the right spend management tool. A lot of businesses turn to prepaid business debit cards as a solution, but in this article, we'll discuss whether they're the right choice for your company. We’ll also compare prepaid debit and credit cards for business to another option you may want to consider: charge cards.

Topics we’ll discuss in this article:

What is a prepaid business debit card?

Prepaid business debit cards are cards where funds must be deposited into the account before the money can be spent (unlike a credit card, where you essentially reimburse the money you spend during a set time period to your credit card provider). Prepaid business debit cards are actually more similar to debit or gift cards than traditional credit cards; although they are sometimes referred to as prepaid credit cards for business.

As a small business owner, you predetermine the spending power by making a direct deposit into the business bank account. These cards work like a regular debit Mastercard or a Visa card — you can withdraw cash from an ATM, while tracking expenses and keeping your spending within budget parameters. This can help improve profitability and clean up your tax filings. Using a prepaid card also addresses the challenges of getting approved for a corporate credit card as a startup or young business with minimal reported revenues and no established credit history.

A prepaid corporate card doesn’t require an approval process or hard inquiry on your personal credit score. Charge cards, which we’ll cover below, don’t require them either.    

Benefits of prepaid debit cards for businesses

Eliminating the approval process and consolidating business expenses to one card are just a couple of the many benefits of prepaid business debit cards. Here are some other perks of using prepaid cards at your business: 

Easily control employee spending

Putting the entire budget in the hands of a manager for a long-term project might be risky. With a prepaid business credit card, you can choose to fund one milestone at a time. This setup could also help manage cash flow for your sales team or marketing department. Each card can be issued with a specific amount, keeping expenses within set parameters. 

No lengthy reimbursement process

Traditional expense systems require employees to use their personal debit card for expenses. They submit receipts for expense reimbursement, a cycle that can take weeks or even months to complete. That’s asking a lot from your employees. With a prepaid card, none of that is necessary. Expenses are covered by company funds on their prepaid cards.   

Cleaner accounting records for tax filings

Responding to an IRS audit when using a credit card reimbursement system could require multiple reports and possibly hard copies of receipts that are in the hands of your employees. Prepaid business credit card systems track all expenses in one place, providing cleaner accounting records for tax filings and audits. 

Rewards programs can be employee incentives

Some prepaid credit card companies offer rewards programs that your company can use as employee incentives. These could include cashback incentives or partner rewards, both of which could be channeled into bonus programs for your employees, helping to increase productivity overall. 

3 top prepaid credit cards for business

If you’re interested in using prepaid credit cards at your business, here are three options you can consider: 

1. Bento for Business

Bento provides a strong user experience and advanced technology. The setup is simple, and they offer a free sixty-day trial for up to fifty cards. After sixty days, monthly subscription prices range from $29 to $149, based on the number of cards you need. 

  • Features: Spend controls, corporate cards, virtual cards for business, invoice payments, analytics and reporting, accounting integration, receipt capture, mobile app
  • Rewards: None
  • Fees: $29 - $149 per month

2. PEX Card

PEX has built its user base in the non-profit and educational space, but they’re making inroads into the private sector with advanced technology and a modern user experience. They offer business pricing and reduced monthly and annual fees for non-profits. 

  • Features: Expense management, cardholder app, QuickBooks/data integration, API integrations, real-time reporting, live chat support, discounts for non-profits
  • Rewards: None
  • Private Sector Business Fees: $49.95 set-up fee, $75-$300 per month 
  • Nonprofit Fees: $39.95 set-up fee, $30-$80 per month 

3. Netspend® Small Business Prepaid Mastercard

A long-time presence in the consumer space, Netspend® now offers a small business prepaid Mastercard. This card is good for sole proprietorships and start-ups looking to separate business and personal expenses, but it’s limited for larger firms with multiple teams.  

  • Features: Prepaid cards, mobile app, employee sub accounts  
  • Rewards: Mastercard Easy Savings® at selected merchants
  • Fees: $9.95 per month, 35% for foreign transactions

A smart alternative to prepaid credit cards: Charge cards

For startups and small to medium-sized businesses, charge cards are a smart alternative to prepaid business debit cards. They offer the same benefits as prepaid cards and more. Charge cards are a type of payment card that don’t have interest rates and require that you pay the statement in full (typically monthly). They sometimes offer partner promotions or cash back rewards. They’re branded, often with a Mastercard or Visa issuer logo, so they’re accepted by businesses, vendors, retailers, and service providers. That gives charge cards all the benefits of a credit card without the added burden of high-interest payments.

3 ways that charge cards are better than prepaid debit cards

1. Charge cards don’t need to be paid in advance

Prepaid debit cards must be fully funded in advance, giving them a preset spending limit. Charge cards don’t require prepayment. The entire balance is simply due at the end of the month. Since the money needs to be loaded in advance, businesses that elect to use prepaid cards may find themselves tying up valuable capital that could be used elsewhere in the company.

2. Charge card users aren’t limited by a prepaid amount

The amount that’s loaded onto a business prepaid credit card is a business’s estimate of how much their employees will need. Prepaid card users who want more money than is available on their cards will typically need to pay an overdraft fee to access it. Charge card users aren’t limited by these predetermined limits. With a charge card like Ramp, they will enjoy real-time limit increase requests. Instead of being stymied by a fixed amount of money, your monthly spend limit can be raised, giving you the buying power your business needs to get ahead. 

3. Charge cards have fewer fees

Prepaid cards can involve a lot of fees, including transaction fees, monthly fees, out-of-network fees, cash reload fees, balance inquiry fees, inactivity fees, card transfer fees, and more. Charge cards have substantially fewer fees associated with them.

Why Ramp is the best corporate card for your business

Ramp is so much more than just a business card. It’s a spend management solution for start-ups, small businesses, and enterprises. In addition to providing charge cards for your organization, Ramp provides expense management, bill pay, accounting automation, real-time expense reports, and seamless integrations with collaboration tools, security, and accounting software.

Many charge cards will charge penalties and/or fees on unpaid balances, but Ramp doesn’t charge any late fees, replacement card fees, or interest. Ramp offers 1.5% cashback and partner rewards from well-known business service providers like Amazon Web Services, Slack, SendGrid, Twilio, and Plaid. These programs can save your company several thousand dollars a year or the returns could be redistributed as performance incentives for your most productive employees. 

With Ramp, there’s no charge to set it up, no fees to use it, and no interest charges on purchases. You do not need to personally guarantee your Ramp account and there’s no credit check required to apply for the card.

Features include:

  • Unlimited virtual & physical cards
  • Unlimited users
  • Automated receipt matching & verification
  • Category, merchant & transaction limits
  • Multi-step request & approval flows
  • Robust expense policies
  • ACH reimbursements
  • Smart accounting integrations
  • Multi-factor authentication & single sign-on (SSO)
  • Advanced roles & permissions
  • Best-in-class customer support
  • Dedicated account managers

Eliminate the complexity of expense reimbursement, streamline your cash flow management, and empower your employees to perform at peak levels with Ramp. 

Learn how Ramp strengthens your finances

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Sr. Content Marketing Manager, Ramp

Stefanie Gordon is a Senior Content Marketing Manager at Ramp. A former financial journalist and content strategist, she is excited to help Ramp develop new, engaging content.

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Can I get cash back from a retailer with my prepaid card?

Regular debit cards give you the option to request cash back when making a purchase in-store. This is deducted from your existing bank balance. Prepaid business debit cards, however, almost never facilitate cash back, as they’re designated strictly for business activities (although, in some cases, they can be used for ATM withdrawals).

What’s the difference between a prepaid card and a gift card?

Prepaid cards and gift cards function in a similar manner, with one key differentiator: once the initial, preloaded sum has been spent, a gift card can no longer be used. Gift cards are also almost exclusively used for discretionary spending.

Alternatively, a prepaid card can be reloaded with funds from your personal or business checking account indefinitely. They are typically used for both business and discretionary expenditures.

Is my prepaid business debit card FDIC insured?

The Federal Deposit Insurance Corporation (FDIC) “insures deposits, examines and supervises financial institutions for safety, soundness, and consumer protection, makes large and complex financial institutions resolvable, and manages receiverships”.

In many cases, prepaid cards are insured by the FDIC—but make sure to check with your provider that:

  • Your prepaid card is eligible for FDIC deposit insurance coverage
  • You have properly registered the card, and
  • Specific deposit insurance requirements are met

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