Spend management apps help you manage your company’s expenses. The fintechs that create these apps issue payment cards that are used by traveling sales representatives. Sales representatives use the payment cards to pay for restaurant meals, rental cars, plane tickets, hotel rooms, and other incidental expenses while traveling. The app analyzes all of the purchases made with the payment card and categorizes them as the appropriate types of expenses.
But there’s a potential conflict between the business models of many fintechs and the business models of companies that provide travel and vacation services. Hotels and car rental agencies often require their customers to provide credit cards, and that could be a problem for a spend management app that only issues debit cards. And if a travel service provider does allow customers to use debit cards, it might restrict the use of its services for those customers. So it’s worthwhile to consider how the travel services companies work and how the spend management apps work.
Some Hotels Don’t Accept Debit Cards
Many hotels will ask their guests to provide a credit card before they check into their room. Hotels do this to protect themselves. For example, a guest might pay $200 to reserve a room. But if the guest accidentally broke a window in the room, that might cost the hotel another $300 to fix. So even if the guest paid $200 on a debit card to reserve the room, the hotel needs to make sure that the guest can pay for any additional damage to the room.
The hotel can protect itself by making the guest provide a credit card to check into the room. That way, even if the hotel only ends up charging $200 to the card, it still has the option of charging more money to the card if it has to do that. The hotel might also want to make sure that the guest will have enough money to pay for additional charges that aren’t part of the regular room fee. One example is meals delivered by room service. The hotel may also make the guest provide a deposit with the credit card. It will refund the deposit after the guest checks out if there were no additional charges.
The decision to accept debit or prepaid cards is up to the hotel. Spendster lists some major hotel chains that do accept debit cards, as well as hotel chains that require guests to provide credit cards. It would still be completely possible for a traveling sales representative to visit major US cities while using a debit card to reserve rooms. The representative would have to avoid a few hotels, though, which could be inconvenient if one of those hotels was hosting an important business conference.
Rental Car Services May Ask Debit Users for Additional Documents
Rental car services may also ask their customers for credit cards before allowing them to rent cars. Like hotel operators, the rental car services are protecting themselves. They don’t want to have to pay for any additional damage caused by their customers. And they might also assess additional charges such as the cost of several gallons of gasoline if the driver returned the car with an empty fuel tank.
As the travel services company Kayak explains, most major rental car services do allow customers to rent cars with their debit cards. But if you use a debit card to pay for a rental car, the rental car service may ask you for additional documents to verify your identity, and it may also ask you for more information about your travel itinerary. A rental car service might not allow you to rent premium vehicles with a debit card either, which could be an issue for a traveling sales representative who plans to use a premium car to impress potential customers.
Spend Management Apps and Travel Services
Spend management apps may provide either debit cards or credit cards to their customers. If your employees use one of these payment cards to pay for all of their travel expenses, this makes it easy for your finance department to check whether a travel expense should be covered by the company. The company can also use the spend management app to set spending limits by category and block purchases from certain vendors. It’s possible for the fintech app to offer these features whether it issues a credit card or a debit card.
Many fintechs can only issue debit cards and can’t issue credit cards. It’s easier for them to convince their partner banks to let them offer prepaid debit cards to their users. This limitation doesn’t matter for many transactions. But if you’re planning to give your employees prepaid debit cards to pay for travel expenses, then it could be a problem if certain travel vendors don’t accept prepaid debit cards. If the app’s debit card wasn’t accepted by a travel service provider, the traveling sales representative might have to use their own credit card to make a purchase. And if they did that, the spend management app wouldn’t have a record of that purchase unless it was added manually.
Checking the App’s FAQ Section
It’s noteworthy that several spend management apps do provide credit cards to their customers, which is relatively unusual for fintechs. It’s understandable why these apps do this. It requires extra work from the fintech to issue credit cards, but prepaid debit cards might not satisfy the needs of their end users. Some spend management apps are focused on travel, for example, so they need to pay close attention to the requirements of travel services companies.
There are also spend management apps that provide debit cards to their customers. Again, it’s still possible to travel with a debit card even if you don’t have a credit card, but you might have to make a few alternative travel arrangements if you do that. To prevent this situation from happening, you can check the FAQ section of a spend management app’s website. The fintech startup will tell you whether it’s issuing credit cards or debit cards.