The use of Prepaid Business Debit Cards for business purposes has steadily increased and broadened throughout the last ten years. Prepaid cards are ideal for business, because they:
- Decrease the risk of fraud inherent in cash and checks
- Reduce the cost of check distributions
- Reduce the cost of check replacements
- Provide an audit trail of payments and transactions
You may be familiar with using prepaid cards connected to your benefit plan. For companies that offer benefits it is commonplace to also have a program called a “cafeteria plan” or “flex plan.” These plans allow employees to subscribe a certain amount of pre-tax funds taken from their paycheck and placed into accounts designated for healthcare expenses, commutation costs and child care. The program is maintained by a benefits custodian, some of which offer a card used to pay for insurance co-pays, childcare fees, transit costs and other related expenses. Using a flex card reduces the amount of paperwork employees have to do, eliminating check reimbursements and maintaining compliance with IRS rules. As pre-tax funds are allocated into flex spend accounts, the amount of taxable income is reduced. The net benefit is that employees just pay for services and move on, while reducing their tax bill in the process.
Many companies use direct deposit to pay employees. Yet, for certain industries with a large number of unbanked (those that do not have a bank account) employees going electronic may be impossible. To leverage electronic efficiencies, and to move away from the expensive check process involved with payroll, certain industries have seen a strong uptake of prepaid payroll cards. Payroll cards work intuitively: the net pay is loaded onto the card, and the employee can access cash at ATMs or they can make purchases wherever debit cards are accepted. Most payroll cards use traditional card and ATM networks, like Visa® and STAR®. For employers prepaid payroll cards decrease paperwork, and for unbanked employees they provide decreased processing fees at check cashing stores, access to Visa® card and MasterCard® card spending, and the status associated with carrying a card.
Paperwork used to be the cornerstone of managing incentives, but no more. Companies have turned to prepaid cards to replace the cash and check processes that used to bog down the system. Additionally, many of the companies that offer incentive cards for business will customize the cards with company logos for added trophy value – transforming the incentive into a reminder item. Programs can run for the long term, requiring a reload component to cards, they are issued once and funds are added when triggered (similar to the way a payroll card works), or they can be single load cards that are issued with a predetermined value and expire when funds have been spent (like a gift card).
Travel and T&E Cards
Your employees feel the same credit squeeze as we all do, so asking them to front the company money for their business travel is turning into a thing of the past. Prepaid business debit cards allow companies to essentially give employees cash advances without the inherent risks of carrying cash. The PEX Visa Prepaid Business Debit Card is ideal for business travelers, because the cards can be used wherever Visa debit cards are accepted, the online spending controls protect the company against misuse, and there is an audit trail for every transaction.
Per Diem Cards
Managing a per diem program can be wrought with issues: determining the rate for the location of the employee, gathering all receipts, and recouping any leftover funds. Controllable prepaid cards ease the burden of per diem plans by enabling administrators to set daily spending limits, automate balance restoration, and have easy access to all transaction data. And, with the PEX Visa Prepaid Card, there is no need to physically recoup unused funds, because administrators predetermine how much is available to the cardholder per day, which cannot be exceeded and there is no cash access.
Purchasing cards, or p-cards, are typically used to streamline the purchasing process for low-value transactions in large corporations and government agencies. These systems are often expensive to implement, but can vastly decrease transactional costs, strengthen purchasing policies, and provide extensive spend information. Unfortunately, these p-card systems require more resources (human, computer, and financial) than the typical small to mid-sized business can dedicate to improving their purchasing process. The PEX Card service enables small companies to realize some of the benefits of a p-card program by providing a centralized administrative interface, merchant category restrictions and spending limits, and detailed transactional data.
Corporate cards are really a catch-all for many types of company expenditures – from small purchases to travel. Corporate cards are often credit cards or charge cards and are subject to interest rate changes as well as credit limits which card companies have been lowering as a result of the credit crunch. Most companies do not distribute corporate cards to all employees, because it is difficult to restrict how the cards are used. The PEX Card service allows employers to tailor each card, taking into account the needs of the employee and company. And, because the PEX Card is prepaid, there are no interest rate changes and cards can have a balance from zero to $10,000.
To find out more prepaid as an option for your business, see how PEX works.