Business prepaid cards: How do they work and what are the benefits?

Business prepaid cards are convenient alternatives to debit and credit cards. They reduce risk, help control overspending and streamline expense management, but how do they work exactly?

This page will explain everything you need to know about physical and virtual prepaid cards, including how they can benefit your business, when you should use them, and how your business can launch its own card program.

How do business prepaid cards work?

Like debit cards, business prepaid cards deduct the purchase amount from the card's balance. But unlike debit or credit cards, business prepaid cards are pre-loaded with a set amount from the business. Here’s how they work.

As the business, you load funds onto the prepaid card, usually done online, which then becomes the card's balance. When partnering with a full stack card issuer - like Checkout.com - these funds can come directly from your acquiring balance which helps funds flow seamlessly from one side of your business to the other, without tying up working capital in transit.

Employees within your business can use the prepaid cards to pay suppliers or for other business expenses such as booking travel or paying for meals.

Once the card's balance runs low or runs out, the employer can reload the card with additional funds. You can also set spending limits for each prepaid card to help prevent overspending, and to manage expenses more efficiently.

If you work in online travel, offer incentive programs or provide on-demand services, you’ll find business prepaid cards especially beneficial thanks to their flexibility, convenience, ease of use, and other benefits, which we’ll describe further down the page.

What is a virtual prepaid card?

A virtual prepaid card is an entirely digital payment card. It doesn't have a physical card. Like most payment cards, virtual cards have a unique 16-digit card number, expiration date, and security code that can be used for online and phone purchases – just like a physical card.

Virtual prepaid cards work in a similar way to physical prepaid cards – the main difference is that they’re entirely digital. They’re often used for one-time purchases, subscriptions, or online transactions where the user doesn't want to use their primary payment card for security or budgeting reasons.

Virtual prepaid cards are typically issued by financial institutions or payment service providers, and the user can load funds onto the card through an online account or mobile app. Once loaded, you can use the card immediately for online purchases or add them to a digital wallet - such as Google Pay or Apple Pay. You can track transactions and balances through the online dashboard or dedicated app.

Learn more: What is a prepayment?

Virtual prepaid cards vs physical cards: Which are better?

Nowadays, virtual prepaid cards are better suited for expense management and corporate cards. The right card for your business will depend on your specific industry and use cases, but virtual prepaid cards are particularly useful for online travel brands, and companies offering on-demand services and rewards programs.

Below, we’ll explain which type of prepaid card is better in terms of convenience, security, reloading, and costs.

Convenience: Both, depending on industry.

Virtual prepaid cards are convenient because you can instantly issue and use them for online purchases (or for in-person payments via digital wallets) without having to wait for a physical card to arrive in the post. While physical prepaid cards can get lost or stolen, they may be more suitable for use out in the field.

Security: Virtual

Both virtual and physical prepaid cards offer security features, such as transaction authorization, but virtual cards offer 3DS2 authentication and can be easily deactivated.

Reload options: Virtual

Virtual prepaid cards may have more reload options, like the ability to reload the card through a mobile app or website. On the other hand, physical prepaid cards may need reloading at a physical location - depending on the type of cards you are using within your business.

Advantages of business prepaid cards

Accelerate how you pay suppliers

Prepaid cards can be a great solution for accelerating how you pay suppliers and streamlining business spend overall. If you launch a card program with a full stack issuing provider (like Checkout.com) you can even use funds loaded straight from the acquiring balance, removing the complexity around pre-funding your prepaid cards.

Better expense management

Business prepaid cards allow employers to set spending limits on the card, monitor employee spending, and receive detailed reports of all transactions. Meanwhile, employees no longer have to use their own cash reserves or be out-of-pocket for any length of time.

Improve cash flow

Unlike using a credit card, your business can move money quickly and easily through a single platform via your virtual prepaid card, while streamlining your costs and making it easier to reconcile transactions. This is particularly true when partnering with a full stack issuing provider that enables you to use funds from your acquiring balance to fund cards quickly and easily.

Increase approval rates

Some business prepaid card issuers, like Checkout.com, enable you to get faster and more reliable issuing thanks to the issuer’s direct scheme connections. This means your business can start spending and improving its cash flow more quickly than it could when applying for a credit card.

Scale more quickly

Virtual prepaid cards are flexible, customizable, and easy to integrate with your existing financial software, making them easy to scale with your business.

Reduced fraud risk

Business prepaid cards can be more secure than cash or traditional credit cards because they can be easily deactivated if lost or stolen, reducing the risk of fraudulent transactions.

No credit check required

Unlike traditional credit cards, prepaid cards don’t require a credit check to obtain. This can make them a good option for businesses with limited credit history, or for employees without a strong credit profile.

Convenient for employees

When it comes to expenses, prepaid cards are more convenient for employees than using petty cash or reimbursement programs. Prepaid cards, especially virtual cards, are much quicker at processing expenses than traditional expenses methods.

Easy to use

Prepaid cards are easy to use and widely accepted at most merchants that accept credit and debit cards.

When should businesses use prepaid cards?

If your business wants to improve expense management and provide flexible corporate cards, then you should consider using a business prepaid card. Thankfully, you can launch your own prepaid card quickly and easily with Checkout.com’s full stack issuing.

With Checkout.com’s one-stop-issuing shop, you can launch a card program and issue both virtual and physical cards to your employees or customers. You can also use funds from your acquiring balance and load them straight onto these funds, removing the need for pre-funding from another source.

To learn more about Checkout.com’s card issuing solutions, visit our product page or simply get in touch with the team.