Business leaders have an array of payment options at their disposal. Corporate debit cards may be just one of many tools for controlling spending, fighting fraud and cutting operating costs, but they have the potential for great things.
What could you do with a corporate debit card, and why are so many of your competitors using them? Read on to make a better decision.
What is a corporate debit card?
In general, debit cards are payment devices that link to funding accounts. Some corporate debit card products blur the lines between these and prepaid accounts by making it easy to load money onto the card. Corporate debit cards aren’t usually associated with banks and other traditional financial institutions, however. The fundamental distinction is that these cards are for business purposes, such as giving your employees the capacity to spend money on official trips.
The migration toward prepaid corporate debit cards
Should you entrust your spending policy to a corporate debit card? In addition to offering enhanced freedom, making the switch might put you in good company: The Mercator Advisory Group predicted that from 2017 to 2022, the value of purchases made with small business cards would swell from $493 billion to almost $690 billion.
At the same time, the U.S. Small Business Administration claimed as recently as 2012 that of the small businesses that used credit cards, only 50 percent used cards that were in their business names. In other words, although the allure of plastic payment methods is hard to deny, companies could probably be doing more to use their corporate credit cards effectively and safely.
Why use corporate debit cards?
Corporate debit tools have some clear advantages that revolve around the way they work:
- Each debit card draws money from an account that you fund to your liking, so there are definitive limits on spending.
- You can sign up for multiple cards in minutes, making it easy to authorize per-project payments.
- You can define category-based limits to restrict spending by day, employee, week, month or even purchase type.
- When a transaction occurs, the system automatically records it in a database that you can instantly check using your smartphone.
These advantages look even more attractive when compared to conventional corporate credit card accounts. On top of not forcing you to worry about fees, interest or fraud issues, corporate debit is simply more convenient.
What is a corporate card, and why is it useful?
One of the primary reasons that corporations use payment cards is to streamline essential business practices. For instance, you don’t have to waste time approving every single purchase that your sales team makes at a trade show if you’ve already authorized specific transaction categories in advance.
Cleaning up your accounting is an excellent reason to switch to corporate prepaid debit cards. For instance, if you’re facilitating company expenses with your personal bank account, it can be pretty hard to determine how profitable you really are. Such practices can also make filing taxes a hellacious ordeal.
Don’t forget about fighting corporate fraud. According to the Association of Certified Fraud Examiners‘ 2018 Report to the Nations, almost 90 percent of all corporate fraud cases involved asset misappropriation. The best corporate debit cards inherently include anti-fraud controls that keep employees from feeling tempted while still building vital trust in the workplace.
How can corporate debit cards help make travel a breeze?
Traditionally, travel expenses have been the bane of business leaders. Throughout history, workers had to keep detailed accounting records and submit them on a regular basis. From there, your accountant had to work whatever dark magic was required to balance the ledger. Although the proliferation of credit cards made the process less paper-heavy, it still limited you to checking up on things once per month when your statements arrived.
Corporate payment cards help make life easier by letting you implement cost-control policies without restricting your staff. Since they can travel and get things done without needing approval, they have the autonomy to accomplish good work on your behalf.
A corporate prepaid debit card might streamline your business expense handling
Does the word “reimbursement” make you queasy? You’re not alone. Your employees also feel the pain of having to keep receipts, substantiate individual expenses and spend more time filing their taxes.
Switching to a corporate card lets you pre-approve valid business-related expenses. Instead of waiting to reimburse someone after the fact, you fund their activities in advance. In other words, you lighten your workload, increase accuracy and simplify your staff’s tax returns.
Does a corporate payment card build your credit?
Sadly, companies can’t entirely escape the grasping claws of the credit system. For instance, you may someday need a loan to pay for a new office or equipment.
How can a payment card help? There are two main ways:
- With corporate credit cards, you can build your credit by paying on time. Of course, if you fall short, it will have the opposite effect.
- You can’t raise your credit score just by using a debit card since there are no loans or interest. You can, however, relieve financial stresses that might make you more risk-prone and likely to default on a debt.
Simplifying expense tracking and reporting
The Digital Age is great because the paperwork does itself. With corporate debit cards, you don’t have to track expenses manually because they’re already compiled in a dashboard or similar account view. This dramatically simplifies expense management and reporting: Since there’s little chance for human error, your records are more accurate, and you spend less time trying to balance the books.
Proactive spending limit tips: Choose a corporate debit card with controls
Corporate debit cards give you the option to set definite spending limits. For instance, if your order fulfillment driver is only supposed to use company funds for gas, then you can limit them to making fuel purchases — The card will automatically deny everything else.
You can also control expenditures by position. For instance, the driver from the previous example probably wouldn’t need the same amount of spending money as their department head did.
Which kind of corporate payment card suits you?
The majority of corporate cards are
- Individual payment cards that require employees to go through the expense reporting rigamarole and pay the bills from the card issuer, or
- Company payment cards that involve the company paying the bills for any approved purchases.
Is a corporate debit card the same as a business debit card?
Not necessarily. Most business payment card products are individual payment cards. Many banks also sell cards with similar names that are connected to regular checking accounts.
Is a business debit card a corporate card?
Once again, payment product marketing terms can be confusingly similar. The distinction, however, usually lies in whether the card is in the employees’ name or the company’s.
How do I know when it’s time to get a corporate prepaid debit card?
What are you waiting for? Corporate debit cards are extremely accessible. Unlike credit seekers, small businesses with poor or nonexistent financial histories can easily get debit payment set up without going through lengthy applications.
It’s best to separate your private finances from your business accounts as early as possible. Corporate debit cards let you make the change for good sooner than other alternatives.
Getting a corporate payment card isn’t as easy as getting a consumer card
Think you can just roll up to the bank teller’s counter and get your business moving with a corporate card? The standards aren’t the same as obtaining a personal card.
Since these payment methods have higher spending limits, they demand you jump through even higher hoops. In addition to verifying that your business has a good credit history, banks commonly check your personal record, and they may want you to fork over a guarantee.
Is getting a business debit card a better choice for companies?
Many companies favor business debit cards over regular corporate payment cards. Like corporate credit, they hold the company liable for purchases made by authorized individuals, but they don’t ask you to jeopardize your credit rating or sift through a horror show of jumbled accounting data.
What can a business debit card do that a corporate card can’t?
These cards empower you to transact without paying extra costs or fees. Why worry about whether your credit’s good enough for a low annual percentage rate when you can forego APR in the first place?
How do you get a business debit card?
Business debit cards make it easy to sign up for an account online. Although you’ll have to complete a few quick forms, the process only takes five minutes as compared to the agony of waiting forever for a response to your credit card application.
Paying other people isn’t anyone’s preferred way to run a business, but it’s an unavoidable necessity. Corporate debit products that let you monitor spending, instantly disable or enable cards, and oversee your finances from your phone can make things a lot simpler. If you can find a tool that’s FDIC-insured, SSL-secured and highly reviewed by entrepreneurs, then you’re in the money.