When most businesses think about cards for financial transactions, they think about debit or credit cards. While these have been the standard types of cards for a long time, a growing number of businesses have realized the advantages of prepaid cards. With powerful prepaid card solutions, a business has an easy way to handle such issues as employee expenses, petty cash withdrawals and even simple incentivizing bonuses.
What are prepaid cards?
Prepaid cards look much like a standard credit or debit card. Many of them are supported by credit card companies, and they can be used at any store that accepts credit and debit cards. However, a prepaid card is more like carrying a wallet with cash. The card is not linked to a bank account or a line of credit. Instead, the card itself stores cash value. When a reusable prepaid card runs out of money, it is worthless until someone reloads it. This characteristic prevents problems such as overdrafts and unbudgeted spending.
The Most Common Types of Prepaid Cards for Businesses
There a few options when it comes to the types of prepaid cards a business uses. Cards are either single-use or reloadable. They are also open-loop or closed-loop.
Open-loop cards: An open-loop card offers the most flexibility for the cardholder. This is the type of card that will work as payment in any place that accepts credit or debit cards. For managers, an open-loop card is a great way to provide a clear travel budget for a business trip. Employees receive their card with a fixed amount as part of their trip materials. This will help them stick to a budget.
Closed-loop cards: Closed-loop cards are cards that only work at a specific location or chain. An employee might receive a gas card for a particular station. A $10 card for a local coffee shop or restaurant can be a fun incentive.
Single-use cards: Handing someone a single-use card is like handing them a $20 bill. Once the money is gone, the card has no value. Most single-use cards are also closed-loop cards used as gifts or incentives.
Reloadable cards: A reloadable card gives more flexibility. For traveling employees, you can assign a card and refill it on a monthly basis or after each trip. Businesses that encourage continuing education might refill cards on an annual or quarterly basis for that specific expense.
The Key Benefits of Custom Prepaid Card Solutions
There are several benefits of prepaid cards for businesses. These types of cards offer security, flexibility and simple financial management. Coupling a prepaid card strategy with a powerful software solution will greatly improve the functionality of these cards.
A flexible way to pay: As the world moves towards a cashless economy, the days of the petty cash drawer are coming to an end. Prepaid cards allow businesses to make immediate purchases either in person or online. This makes it much easier for employees to make travel arrangements, purchase meals or entertain clients from the same fund.
Improved security: Because prepaid cards are stored value cards, it limits the financial hit if the card is lost or stolen. There is not a direct link to your company’s bank accounts. Single-use cards have lower security measures because they normally do not carry much value. Most reloadable cards require a PIN for use. If someone steals the card, they cannot access the funds. With the right prepaid card services, your business can simply remove the value from a lost card.
Take control of expenses: Validating travel expenses is a time-consuming process. With a prepaid card, you can simply limit the trip budget and allow your employee to make the appropriate purchases. Prepaid card management software can also let your accounting department see how employees are spending funds in real-time.
Avoids credit concerns: For new businesses, establishing credit can slow down the startup process. Prepaid cards allow you to make purchases without a line of credit. These initial purchases can lead to trust and improved credit as your business grows.
Why Customized Prepaid Card Programs Are Your Best Option
Businesses of different types and sizes use a variety of operating models. The prepaid card programs that might be perfect for one business may not be as helpful for another. You want prepaid card management software that gives you the flexibility your business needs.
Custom card rules: While some businesses have no problem handing an employee an open-loop card for general expenses, many will want to have greater control over how money is spent. Well-planned prepaid card software development allows you to set rules for expenditures easily. You can place caps on purchase amounts and limit a card to particular categories of purchases. You can also turn an open-loop card into a closed-loop card by limiting the places where an employee can spend money. As needs change on a trip, your employee can contact the office for approval to modify the rules.
Integration with current financial tools: When you have already invested in payment solutions and financial software tools, you will want your prepaid card software to work with the current system. Your software development partner can make certain that everything fits together seamlessly.
Comprehensive management: In addition to making spending rules, your accounting team will have access to real-time reports of expenditures. For reloadable cards, they can add or subtract funds as needed. They can also nudge employees who are spending too much in a given category. This will help maintain fiscal responsibility.
Multiple card options: Well-designed software can work with the variety of cards that are currently available. Whether it is a mag-strip, EMV chip or contactless payment device, your software solution must work with what you plan to use.
Enhanced security: Although prepaid cards are not directly connected to your bank accounts, they are still connected to your network. The right software solution will include encryption protocols that protect the records of transactions and maintain the safety of your network.
Finding the Right Software Partner
When you are looking for technological solutions for your business, you need a partner who will listen to your needs and has experience designing custom prepaid card solutions for many organizations. With the right software designed by the right partner, your business can enjoy the many benefits of prepaid cards.