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If you’re a small business owner trying to more effectively manage your spending, consider investing in a prepaid business debit card. Prepaid business debit card holders preload their card with however much money they want to spend, ensuring that they never go over their limit or spend more than they can afford.
Prepaid debit cards became popular in the 1990s as credit card companies began to realize that many Americans could not qualify for a credit card or were defaulting on their balances. The credit card companies began offering lines of credit that were collateralized with an equal sum of money deposited with the credit card bank.
One of the most successful companies to use this prepaid model is Netspend. Founded in 1999, Netspend is a leading provider of Visa® prepaid debit cards, prepaid debit Mastercard cards, and commercial prepaid card solutions, with over 10 million customers served in the U.S.
One of their best offerings for small business owners is the Netspend Small Business Prepaid Mastercard. Let’s take a closer look at how this card works, its benefits, and its drawbacks. We’ll also clarify some common misconceptions about prepaid debit cards, and look at some alternatives to the Netspend Small Business Prepaid Mastercard® so you can understand your full range of options when it comes to prepaid debit cards.
Prepaid debit cards are different from business credit cards in that you can only spend what you have already preloaded onto the card. In other words, you have to pay up front.
Credit cards offer a revolving line of credit, which you can typically pay off over time. In addition, outstanding credit card balances accrue interest, which must also be paid off. It’s useful to think of using a prepaid card as spending your own money, because you already paid for the balance of the card. Using a credit card is like spending borrowed money, which you are expected to pay back at a later date—with interest.
Another difference is that many credit cards offer spending rewards in the form of points, cash back, or airline miles. Most prepaid cards, including the Netspend Small Business Prepaid Mastercard, do not. However, credit card holders typically have to spend a considerable amount on their credit card to really see rewards benefits. If you plan on spending a lot on your prepaid debit card, and you know you have the funds to back it up, consider a rewards-based credit card.
One major similarity between prepaid debit cards and credit cards is that they usually have a card network logo on them like Visa® or Mastercard. This means that the card can be used at any place that accepts either of these methods of payment.
See Your Business Credit Card Options
You can apply online for a Netspend Small Business Prepaid Mastercard. You’ll get instant approval and should receive your card in the mail within seven to 10 business days. Once you receive your card you can activate it online or via the phone, and then you can add money to your account.
If your business is not a sole proprietorship, you are required to undergo business verification within 30 days of activating your Netspend Small Business prepaid card. Business verification gives cardholders the ability to have up to 10 sub-accounts, their business name on the card, and a maximum balance of $25,000. Unverified businesses can only have two sub-accounts and a maximum balance of $15,000. Both verified and unverified businesses have a daily spend limit of $5,000.
Loading funds onto your card can be done via check, ACH transfer, direct deposit, or a physical reload station. Netspend operates over 130,000 reload stations around the country. You can find one close to you via their website.
Netspend also has a mobile app where you can deposit funds onto your card. Note that it takes two to three days to initially load funds after activating your Netspend Small Business prepaid card.
In terms of fees, a Netspend Small Business Prepaid Mastercard account costs $9.95 per month. Each sub-account costs an additional $1.95 per month. If you use all 10 sub-accounts, you are looking at a total monthly cost of $29.45.
Netspend charges you $2.50 for every ATM withdrawal and $0.50 for ATM balance inquiries. If your transaction gets declined, Netspend will hit you with an additional $1 fee.
A Netspend Small Business prepaid card account does offer a lot of flexibility in terms of payment collection. The Mobile Check Load option in the Netspend app allows users to deposit a check into their account simply by taking a picture of it.
Netspend account holders are also eligible to apply for ProPay, which allows them to accept debit and credit card payments via their phone and deposit the funds directly into their Netspend account. ProPay requires a JAK card reader and an Apple or Android mobile device. Note that there is a 2.7% fee for swiped transactions and a 3.5% fee plus $0.15 for keyed transactions (instances where the user has to type in the credit card information).
Additional features include the ability to download your Netspend Small Business account transactions to QuickBooks for accurate bookkeeping. Netspend Small Business Prepaid Mastercard holders are also offered rebates on various business products or services, including hotels, restaurants, and gas stations. In addition, Netspend® account holders can opt to receive customizable text and email alerts so they know every time money moves in or out of their account.
At this point, you might be wondering why you should use a prepaid debit card. If you already paid for the balance of the card, why not just use cash or a regular debit card, and save yourself some time? However, there are several benefits to using a Netspend Small Business prepaid card that you don’t get with cash.
The main reason to get a prepaid business card is the same reason to get any business card: It allows you to separate personal expenses from business expenses. This will make your life a whole lot easier come tax season. Plus, Netspend accounts sync with QuickBooks and other popular accounting software tools so you can get your entire transaction history.
A prepaid debit card is perfect if you need to manage the spending of other employees. Because you supply the funds for the card, you can ensure that nobody using it spends more than you want them to. With the Netspend Small Business Prepaid Mastercard, you can distribute funds to up to 10 sub-accounts. Spending on a Netspend account is also capped at $5,000 each day. Just remember that additional sub-accounts will cost you $1.95 each per month.
Running an entirely cash business makes it very difficult to keep track of your money. If you can’t qualify for a business credit card, a prepaid debit card at least allows you to allocate cash for business purposes in an organized way. A prepaid card may also come in handy for business expenses that can’t be paid for in cash.
Most prepaid business debit cards are issued without a credit check, meaning that if you have bad credit, you can still acquire a prepaid card. All it takes to receive a Netspend Small Business prepaid card is a short application and an ID. However, if you want to acquire a business credit card in the future, you should keep in mind that a prepaid debit card won’t help you build credit. In this situation, you might decide to look into obtaining a secured business credit card and upgrade to an unsecured card down the line.
One of the best features of the Netspend Small Business prepaid card is that it is easy to add funds to the card. Along with checks, ACH transfers, direct deposit, or physical reload stations, account holders can use ProPay to add debit and credit card payments directly to their Netspend® accounts.
Depending on your business needs, the Netspend Small Business prepaid card may not be the right fit for you. Consider the following factors when shopping around for a prepaid debit card:
The Netspend Small Business prepaid card offers a maximum of 10 sub-accounts, $5,000 daily spending limit, and $25,000 maximum account balance. If you operate a large business, that might not cut it. There are other options available that offer more sub-accounts and don’t cap spending limits.
As mentioned previously, monthly fees can be as high as $29.45 with the Netspend Small Business prepaid card. While that might not seem like much, you can find lower fees in the market. In addition, other prepaid card providers are often willing to waive the monthly fee if you reach a certain spending threshold.
If you operate a larger business, or are looking to avoid paying monthly fees, consider these alternatives to the Netspend® Small Business Prepaid Mastercard®:
The Bento for Business Visa® Debit Card is a great option for new businesses, startups, and businesses in the early growth stages. When you open a Bento prepaid business card account, you’ll receive two cards for free. Afterward, you’ll be charged varying fixed rates, depending on the amount of cards in use. The rates are as follows:
However, Bento will waive these fees if your business spends more than $20,000 per month with its prepaid cards.
Similar to Netspend, the maximum amount of money you can load to your Bento for Business Visa® debit card each day is $25,000. However, cardholders can also spend up to $25,000 each day, compared to a $5,000 spending limit on the Netspend Small Business Prepaid Mastercard.
Other features include an unlimited maximum balance and easy integration with business accounting software.
With the ability to have over 100 sub-accounts and no spending limits, the PEX Prepaid Visa® is the perfect card for large businesses or businesses on the verge of major growth. The big drawback of this prepaid business card is the fees: PEX charges $7.50 per card plus a flat setup fee of $49. However, PEX will waive all fees if your business spends $50,000 each month on the PEX Prepaid Visa®. Plus, PEX will allow you to load up to $25,000 each day onto your prepaid card.
One unique feature this prepaid business card offers is the PEX API, which allows you to create a custom finance system that makes sense for your business.
The Dash Prepaid Mastercard is a good option for business owners who want to keep close track of how their money moves. With Dash, you load funds into your account via bank transfer. Employees must then request funds for their prepaid cards through a mobile app, which the account holder can then approve or reject. The account holder can also set varying spending limits on each card, and freeze or suspend an employee’s card.
In terms of limits, Dash allows for a maximum of $100,000 in your account at any given time and a maximum transfer limit of $10,000 when sending funds to an employee card.
If you want the convenience of a business card and the peace of mind that comes from paying with cash, a prepaid business debit card may be right for you. However, not all prepaid cards are the same, and you should consider your business’s unique circumstances when shopping around. Thankfully, between Netspend, Bento, PEX, and Dash, there is a robust marketplace that is sure to have the solution for you.