Should I Get a Prepaid Business Checking Account?

How to Select a Checking Account for Your Business | Fora Financial Blog

A checking account is a simple financial product offered by banks and financial institutions to both individuals and businesses alike. These are very liquid accounts, in that the funds therein can be accessed using ATMs, cheques, electronic debits, and various other methods.

The checking account serves a special purpose. It enables the account holder to easily make deposits and withdrawals. Checking accounts don’t place any limits on either. Whereas savings accounts and often limit both the number of deposits and withdrawals that the account holder can make in a month.

This increased liquidity is what makes checking accounts a better option for daily spend compared to savings accounts. However, this liquidity does come at a cost. Account-holders are rarely offered any interest on their funds if any at all. 

Most checking accounts do have certain fees associated with them. They can rack up pretty quickly if the account holder isn’t diligently keeping track of them. These could be overdraft fees, minimum balance maintenance fees, etc.

What is a prepaid business checking account?

A prepaid business checking account works on the same principles as a conventional checking account but with one major difference. The account has a set amount of money in it that can be accessed through different withdrawal methods. The prepaid business checking account functions as an alternative payment method to a company credit card or cash.

Business owners should be very careful about keeping their business spending separate from personal spending. Mixing the two could lead to potential legal and tax implications in the future. Distinguishing between the two is easily possible with a prepaid business checking account.

Do prepaid business checking accounts come with debit cards?

Prepaid business checking accounts do come with a debit card. They’re often the most used withdrawal method for these accounts. For example, a company could utilize these prepaid debit cards to manage employee spending.

They can give these cards to employees for business expenses instead of company cards. This makes prepaid business debit cards a great alternative for businesses that would either struggle with access to credit or simply don’t want to hand out company credit cards.

Advantages of a prepaid business checking account

There are several advantages of a prepaid business checking account. Chief among the benefits is that it enables the business owners to keep their personal and business expenses separate. This is vital for accurate bookkeeping. 

  • Safer than cash

Having a prepaid business checking account provides more control over company spending. It also eliminates the need to dole out cash to employees for work-related expenses. 

  • Low risk of overspending

Unlike credit cards, there’s a much lower risk of overspending when utilizing the prepaid business checking account for expenses. That’s because the account has a set amount of funds available in it. There’s no credit line to draw from so business owners always know their entire financial outlay for that particular account.

  • Easy to reload

It’s very easy to reload funds in the prepaid account. That can be done almost instantly in most cases. So even if the account were to run out of money, funds can be deposited in it fairly quickly to ensure that there’s no disruption in business due to the unavailability of funds. 

Disadvantages

  • Can’t get rid of the fees

Some people might have the misconception that a prepaid business checking account may not have the fees that are typically associated with a business checking account. That’s not the case. There are still going to be fees that the account holder will need to pay to continue using the account.

  • Can’t borrow funds from the bank

One of the biggest benefits of a credit card is the ability to borrow money from the back without having to pay any interest on it for at least a month. This can hold many businesses over during a cash constraint when they’re just waiting for payments to come in. It’s not possible to do that with a prepaid account.

How does a prepaid business checking account work?

Prepaid business checking accounts work pretty much the same as a normal checking account. There are no credit checks to go through to open the account. The funds can be deposited through a variety of methods and withdrawn through cheques, debit cards, online transfers, etc.

They allow for simpler money management because a set amount of money is loaded onto the card at regular intervals. Business owners can keep a strict check on expenses and manage how expenses are made using the card.

The 5 best prepaid business accounts and cards

  • American Express Serve

The American Express Serve FREE Reloads card is a great option. It allows for reloads to be made through over 45,000 points across the United States. It’s free to deposit funds through a bank account or direct deposit as well. There is a $6.95 monthly fee on the card, though, but it’s waived for residents of New York, Vermont, and Texas. 

  • Bento for Business

This prepaid debit card is primarily meant for small business owners. A flat fee is charged per account on a sliding scale. For example, customers pay $29 per month for up to 10 cards. The daily card load and transaction limit are capped at $25,000 daily per card. Bento does waive the monthly fees if the business spends over $40,000 per month on its account.

  • PEX Prepaid

Meant primarily for mid-sized businesses, there are no daily transaction limits on a PEX prepaid business debit card. It’s possible to load up to $25,000 on the PEX account without any minimum load requirements. Up to 100 employee cards can be attached to one prepaid business debit card account. 

  • DASH Prepaid

Dash is another free prepaid business debit card. Funds can be added to the account through bank transfer. There are some limits that customers have to keep in mind. It’s only possible to have $100,000 in the account in one calendar month. A maximum of $10,000 can be transferred to an employee card.

  • Emburse

The Emburse prepaid Mastercard is a solution for teams with remote employees. Hence everything is virtual. There are no physical cards to deal with. Business owners can set up employee cards through the main account. The fees are a bit on the higher side, though. Emburse charges $45 per month for up to five active cards going all the way up to $225 per month for 30 active cards.

Are there eco-friendly prepaid business checking accounts?

There are online banking service providers that now offer prepaid business checking accounts. However, not many provide an eco-friendly option. This makes it difficult for people who want a banking solution that holds the same values as them. 

Enter Aspiration

Aspiration is one of the only neobanks to provide an eco-friendly checking account. Its powerful cash management accounts combine the best features of both a checking and a savings account. Users enjoy the full liquidity of a checking account while receiving up to 1.00% APY on their funds. 

Aspiration is also 100% committed to clean money. It promises not to use a single dollar from customer deposits to fund fossil fuel projects that damage the environment. You too can be part of this green money revolution by opening an account with Aspiration.

Leave a Comment

Your email address will not be published. Required fields are marked *