Credit card vs. debit card vs. prepaid card

Corporate cards are here to take away the stress of spending management. Any company of any size can make use of a credit card and debit card to manage their day-to-day business expenses. But before you begin your journey with payment cards, you need to compare different types of payment cards available. 

They are usually categorized into credit cards, debit cards, and prepaid cards based on how the fund transfer happens between the card and the bank account. Understanding the nature, uses, and benefits of corporate cards can help you pick what is best for your business.

Advantages of using debit cards

Debit card is when you make purchases and spend money directly from your card associated with your bank account. If you want to stay away from paying back money or interests and regulate spending through a limited budget, then debit cards are a great choice. As the money goes for the expenses directly from your bank account, you have the edge over controlling how much you payout. Tracking gets easy, and never will you spend more than intended.

Expense control

You are not given access to an infinite amount of credits, but only the amount available in your bank account. This helps you to budget, since every time you transact, the money is deducted from your account and you cannot go into debt.

Stress-free application process

Banks aren’t stiff when it comes to sanctioning a corporate debit card. All you need is to apply for one through the bank portal or app. To procure a credit card, you will have to produce a whole list of documents, including your statement and earning proof.

Easy to maintain

You aren’t indebted to anyone when you pay from a debit card. And there is no need to have cash allocated to clear off the settlements at the end of the month. When it's not cleared on time, you will pay a late fee too. When there is a need for hard cash, it transforms into an ATM card.

Drawbacks of using debit cards

Debit cards

Overdraft charges

Possibilities of overdraft charges when the account balance strikes a negative amount.

Credit scores

Credit scores can get affected every time the minimum balance isn’t maintained.

Maintenance charges

You have to pay monthly maintenance charges for certain debit cards.

Advantages of using prepaid cards

Prepaid cards are new-age debit cards where you can load up money from your bank account and use it as a debit card. Prepaid business credit cards are not directly linked to your bank account. So no matter what, you only use what you add here or somewhat above that.

You can apply for one of these from banking service providers, top up with the amount you need for expenses and start using it as a regular card. Generally, there is a charge around maintaining a prepaid charge. The fee might be maintenance fee, transaction fee, or cash loading fee. 

Overdraft protection

Prepaid business credit cards spare you from overdraft charge, which happens when you pay from a debit card. In most cases, the payment gets processed, and you will be requested to pay back the amount with interest.

No interest

There is no interest associated with any transaction like credit cards. You use your own money that you have loaded. So there is no hassle around repaying the money or paying interest for the loaned amount.

Smart budgeting

You can load only the projected expense amount of the month into the card. This way, you spend based on what you planned, and the expenses are under control. Prepaid employee expense cards are better than a credit card and debit card.

Drawbacks of using prepaid cards

Prepaid cards

Chances of losing money

High probability of losing money if the account is left unattended and money is not spent.

No chance of earning interest

There is no likelihood of earning interest as the money stored in a prepaid card is not linked to the bank account.

Extra charges

Prone to charges like maintenance fee, deposit fee, paper statement fee.

Advantages of using credit cards

This is the universally known and accepted mode of payment. They come with a line of credit that you can use to repay the expenses once the pay cycle is over. Around 50 to 60% of businesses use credit cards worldwide, and they see this as a backup option for their business funding.

Credit cards have become the most convenient way to cover unexpected expenses for medium and large-sized businesses. You can compare business credit cards available in your region to choose the best plan suitable for you.

Cash flow management

There is no procurement if there is no cash flow. No procurement means no business. So there is a demand for an additional funding source, and these demands are so sudden and unpredicted. So, businesses need a trustworthy and reliable payment system that lends credit whenever asked.

Cards for your employees

Employees have business expenses too, like buying a work from home furniture setup or going on business trips. Empowering them with credit cards can show that you trust and care about them. A corporate credit card allows you to perform this.

Exciting rewards

Debit or prepaid cards don’t bestow you with rewards and cashbacks, but credit cards do. You get valuable rewards or offer coupons for every payment made through a credit card. 

Credit score improvement

When you clear out your credit card dues on time, you maintain a good payment history. This will fetch your company an astounding credit score. 

Drawbacks of using credit cards

Virtual cards

Chargeable interest

Once your payment is due on credit card, you are required to pay back with an interest amount.

Complex paperwork

The paperwork involved in issuing credit card is huge compared to a debit or prepaid card unless you choose the right provider.

  • Aiding in cashflow management
  • Impact on business credit score
  • Interest charges
  • Overdraft fee/maintenance fee
  • Helps in budgeting
  • Acceptance of the payment mode

Which is the right card for your business?

Ultimately, credit card wins as it offers the best of both worlds for SMBs and even large companies. Credit card users can reap many benefits in the form of value, better security, rewards, etc. Establishing a credit score and maintaining a decent cash flow is always prevalent among small businesses. Credit cards tick off these two and are an excellent backup expense resource.

They are also accepted almost everywhere. You get a one-month duration to pay back the due, which you can easily manage with the incoming cash flow of your business. Though debit cards seem like an uncomplicated option, corporate credit cards aren't the same as normal credit cards where you just spend and spend until you go broke. Corporate credit cards come with smart money management features which efficiently let you handle cash flow and expenses without breaking the bank.

You can customize these cards based on your requirements, and the ability to get multiple credit cards for your employees is another attractive advantage for large enterprises. This is why businesses are leaning towards credit cards more and picking them when they compare corporate cards options.

What does Volopay decide to offer?

Volopay bridges the gap by letting you customize your corporate card while offering the benefits your business deserves. You can get both physical and virtual cards based on the kind of transactions you make. The physical card is an actual card that you can use as an ATM card to tap and pay. Virtual cards are also like physical cards, except they aren’t plastic cards. You are provided with a card number and pin through which you can carry out transactions.

The primary interface lets you monitor the spending and assign virtual cards to your employees, which acts as a prepaid business credit card. It is because you can assign a definite budget to each of these cards. Do away with the cumbersome reimbursement process by authorizing your employee’s business expenses through a prepaid employee expenses card. 

Volopay’s credit card management system lets you enjoy unlimited virtual card creation. You can create a new card and assign it to an employee or an application’s monthly subscription within seconds. 

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Where can I use the Volopay corporate card?

You can use the Volopay corporate card for making repetitive payments like application subscription charges, online purchases, and employee business spending.

Does applying for the Volopay Corporate Card affect my personal credit rating?

Volopay corporate credit card only helps you to strengthen your business credit score. It doesn't involve or get reflected in your personal credit score in any way.

How is my company’s credit limit determined?

The maximum credit limit is determined based on the cash flow state of your business, repayment history, bank balance statements, etc. 

What accounting integrations does the Volopay Corporate Card have?

No more manual entries in other accounting applications, as Volopay allows you to integrate with them seamlessly. Some examples include Quickbooks and Xero.

What spend controls do I have access to?

You can assign budgets to each virtual card created and set up customized approval methods for each card if one has to exceed budgets. 

Related pages to corporate credit cards

With corporate cards, businesses can simplify and track employee expenses at ease with these best practices.

With the help of corporate credit card expense management, you can streamline your expenses, and simplify the reconciliation process.

With corporate credit cards, businesses can manage their accounts and track expenses more efficiently.