Prepaid employee debit cards vs company credit cards

Most businesses, even established companies, still rely on company credit cards to manage expenses. While we've made significant progress since 2021, there's still work to be done to convince the business world just how suboptimal these traditional tools are.

You see, payment technology has come a long way. In our private lives, we now have access to an almost endless range of options, including Apple Pay, digital wallets, buy-now-pay-later services, AI-powered budgeting tools, and challenger banks with real-time notifications.

But company payments have evolved significantly, yet many businesses remain stuck with outdated systems. And as you can probably tell from the tone of this introduction, they shouldn't be. There's a far better substitute that suits virtually every business out there.

This article explains the many virtues of prepaid company expense cards. They work just like the credit cards we're all used to, but also eliminate all the headaches that come with them.

Let's start with a basic definition.

What are prepaid cards for employees?

At a glance, a prepaid card looks exactly like any other payment card — it's a small, plastic rectangle with protruding numbers on the front. On the back, you'll find the same magnetic strip and Card Verification Code (CVC) you get on every credit card.

And crucially, you use them just like you would a credit card. Online, in-store, via mobile wallets, contactless payments, and even over the phone.

But as the name suggests, the card is prepaid, meaning that it's preloaded with a specific amount, and you can't spend one penny above that. Which is what makes these such valuable assets for companies.

Prepaid cards for businesses are not connected to the main company bank account, so they are less risky to hand out to employees. Modern prepaid card solutions are integrated with AI-powered dashboards, where finance managers can handle spending limits and track payments in real time, and receive automated policy enforcement alerts.

Prepaid cards vs debit cards

We need to add one further clarification here. For the corporate user, prepaid cards vs debit cards is really a distinction without a difference. They essentially do the same thing.

Both only let you (or your employees) spend the money available on the account. There's usually no credit or overdraft function.

But for merchants, this can mean the difference between accepting a payment and rejecting it. For largely technical reasons, many don't accept purely prepaid cards.

In this article, we're going to use the terms prepaid and debit cards somewhat interchangeably. The key thing for you to know is that they're not credit cards, and we think they're better for businesses because of that.

Just so you know, Spendesk issues employee debit cards. You can have as many as you need to give your team members the autonomy they need.

These are still "prepaid" in the sense that employees can't spend any more than is made available to them. But purchasing debit cards has a far higher acceptance rate – especially online.

Why should your company use prepaid cards?

The way most businesses deal with credit card purchases is inherently flawed. Generally speaking, they follow one of these patterns:

1. Almost nobody has a card. Perhaps just the founders or the CFO can spend on behalf of the company.

2. A few managers have cards. This is really just a slight evolution from scenario 1.

3. A purchasing or procurement team has the cards. And every single transaction goes through them.

All of these options take payments out of the hands of your frontline staff and add extra red tape to every small transaction.

And while they may seem more secure – nobody can spend without approval – they actually lead to far more expense claims, where the employee pays up front and the company reimburses them.

Which is the situation you should be avoiding at all costs.

Prepaid cards to the rescue! Together with a smart AI-powered expense management platform, they're perfect for giving your employees the freedom to spend when they need to, while also keeping an eye on your budget.

Instead of giving people access to the unlimited funds of a credit card, they can only access a predetermined amount, based on rules you set up beforehand.

How do prepaid cards work?

For your employees, Spendesk physical prepaid cards work in exactly the same way as any other card they're used to — either by swiping and signing, using chip and pin or contactless payments, or mobile wallets when making an online transaction.

They can also use virtual cards to pay online, which we've explored in detail here.

Both the physical and virtual versions work with the MasterCard network in Europe and Visa in the US, the world's most trusted payment brands. This means that they're accepted at millions of stores in over 200 countries, giving you the same flexibility as traditional cards. You can even use it to get money from an ATM!

But in order for employees to be able to purchase things with their prepaid card, their manager first needs to give them access to funds. Using modern controls, managers can now define dynamic monthly budgets that adjust based on spending patterns, set merchant-specific limits, and create time-based restrictions. If a transaction falls within these parameters, it's automatically validated, but the system can also flag unusual spending patterns and potential policy violations in real time.

Of course, it's also possible to set the budget and transaction limits to zero, which means that payments are only possible by making a request. On the other hand, if there are some high-level employees who you would like to trust with more financial freedom, you can easily give them access to much higher amounts of money.

For virtual cards, the system offers enhanced security features. One-time-use card numbers can be generated for specific purchases, significantly reducing fraud risk. If the user's budget and transaction limits allow for the transaction, or a manager approves an out-of-budget purchase, a unique virtual card is created that can immediately be used for this specific payment alone.

Then finally, you also have recurring cards designed for online subscriptions (like your SaaS tools). Simply create a virtual subscription card, and the right amount is loaded onto the card when the payment is due, so the subscription is automatically paid.

Next level: prepaid expense cards that reconcile payments for you

Really good prepaid cards take all of this to another level. Because they're built specifically for businesses, they tackle one of the biggest recurring challenges for finance teams: the monthly close process.

With a normal credit card, each user has to keep their receipts and submit them to finance periodically. Finance teams then have to match these receipts to the card payments to make sure that each payment was legitimate.

When you have a handful of cards, this can be tricky. And if those cards are shared around the whole company, it easily gets out of control.

Modern prepaid cards come with mobile apps that automatically capture receipt data, match expenses to transactions, and detect duplicate or fraudulent submissions. These are verified by automated systems that can categorise expenses and flag policy violations before they reach the finance team.

So at the end of the month, the finance team receives pre-processed expense reports with automated compliance checks, ready to export to your accounting automation tools.

Embrace the power of prepaid cards

If after all that you're convinced, there's only one thing to do: check out your best options to get prepaid expense cards for your employees.

When you do, here are a few keys to look for:

• Flexible limits that can be set and changed for each individual card with dynamic controls based on spending patterns

• Virtual cards (one-off and recurring) that have unique card details for every payment and enhanced fraud detection

• A mobile app with automated receipt capture that gives your finance team spend control no matter where they (or your employees) are

• Automated approval workflows with real-time policy enforcement, so managers don't have to send emails back and forth

• Integrations with your accounting software and ERP systems, so you can avoid manual data entry at every step

• Real-time analytics and reporting features to help optimise spending and budgets

Spendesk offers all of that. So why not start your search by talking to us?