Non-profit credit cards demystified.

The widespread use of the internet has led to businesses of all types turning to electronic payments as a way to reduce processing costs while automating more of their expense management. Many non-profit companies use non-profit credit cards as a method to manage their expenses more efficiently. However, credit cards bring their own risks and may be difficult for some companies to obtain. It is important for non-profit managers and boards to understand the benefits and risks of credit cards and other ways that they might be better able to control their expenses and prevent fraud.

What is a non-profit credit card?

A non-profit credit card is a type of business credit card that is used by non-profit organizations. Like other credit card companies, those that issue credit cards to non-profit companies rely on credit in order to make decisions about whether to approve the applications or to deny them.

Non-profits are unique because they are not owned by anyone, which means that card issuers cannot rely on the credit history of a person when making their decisions. Instead, they rely on the credit history that the non-profit applicant has built for itself. Non-profits that have not had sufficient time to build their credit histories may not be able to obtain credit cards that they can use.

How can you use non-profit cards?

Non-profit companies that are able to obtain non-profit credit cards may use them in multiple ways. The cards may be used as expense management tools. Instead of relying on outdated methods of expense management such as reimbursement request and approval processes, non-profits may give their employees credit cards to make the purchases that are needed by the agency.

This can help them to save money and time that would otherwise be spent on processing costs. The transaction data can be imported from the non-profit credit cards into the companies’ accounting software for a more automated process, helping to eliminate human error in data entry. However, using credit cards have some issues on their own.

Who can benefit the most from a non-profit credit card?

Non-profit companies of all sizes may benefit from having non-profit credit cards, but smaller non-profits that do not have the resources to have their own internal accounting departments may derive the greatest benefit. Non-profit business managers may save substantial amounts of time by using paperless systems with credit cards than by relying on manual data entry and hours spent reconciling accounts by hand. They also might eliminate the check request and approval process entirely if they pay for the agency’s expenses using their credit cards instead of with paper checks.

Non-profit credit card vs. non-profit debit card

A major issue with relying on non-profit credit cards is that debt can quickly spiral out of control. A 2016 study found that Americans had $0.8 trillion in credit card debt. In 2017, CBS reported that credit card debt in America had increased to more than $1 trillion. Credit cards for businesses, including non-profits, also do not have the same protections that consumers enjoy.

Card issuers are allowed to raise interest rates at any time on the balances that are carried on business credit cards. This means that if your non-profit company uses credit cards to make purchases and to conduct all of its daily operations, you may quickly find that the company is contending with high levels of debt that could threaten it.

A better option may be to use non-profit debit cards for your non-profit business. With these, your company’s cards are linked to your existing checking account so that the money that is spent is yours. Non-profit debit cards do not have interest charged on the balances since the money that is being spent comes from your account.

Non-profit credit card vs. non-profit prepaid card

Non-profit prepaid cards are similar to debit cards except that they have money that is placed on each card. With these cards, non-profit companies choose the amounts with which to fund the cards. The amounts that they choose will serve as the spending limit on the cards, and they offer more control to the non-profits without having the downside of non-profit credit cards.

Prepaid cards from Bento for Business, for example, allow businesses to establish their own spending limits and to exert controls at the purchase level. Non-profit managers can limit the transaction types that are allowed on each card, and other attempted purchases will be declined at the point of sale. Non-profit debit cards provide more control without the downsides of a non-profit credit card. Non-profit debit cards encourage transparency with purchases.

Learning from a non-profit case study

The importance of having strict expense controls in place as a part of a non-profit company’s expense management process cannot be emphasized enough. It is an unfortunate fact that non-profits can be targeted by their own employees as well as by external fraudsters. In one case involving a non-profit agency that provides care for developmentally disabled people in New York, a company executive managed to embezzle $100,000 in Medicaid funds that were meant to pay for services that the company provided to disabled people.

The woman’s fraud scheme lasted for four years before she was caught. Many fraud schemes at non-profit companies last for several years before the perpetrators are caught because of a lack of strong internal controls.

How non-profit debit cards can help to control spending

Using non-profit debit cards can help your company to control spending. The cards from Bento for Business can be used at thousands of locations across the U.S. and around the world. There are no credit checks, so your non-profit company will not need to have built its own credit history for approval.

The cards can be used to control how they are used. You are able to limit the types of transactions that individual employees can complete according to their job requirements. For example, if someone needs to travel to a conference, he or she can have a card with the allowed transactions limited to the travel categories that you choose.

You are also able to decide how much is available to spend on each card by the day, week or month. Your company will have its own dashboard so that the board can log in and check the spending on each card and can cut off an individual card for misuse using a mobile device in minutes. Your business will not be charged interest, and your deposits are insured up to $250,000 by the FDIC. There are several packages available to meet the needs of non-profit companies of all sizes. To learn more about how using non-profit debit cards from Bento for Business can help you to prevent fraud and control spending, call 866.289.1104 or signup for our free 60 day trial.