The Benefit of Virtual Cards
I’ll come back and add to this story down the road, but I’ve become a big fan of virtual credit cards over the past two years. These single purpose cards have been a lifesaver for managing the expenses of a growing start-up. I had an experience recently that highlighted a massive benefit of using a virtual card instead of a traditional credit card.
Our company has been mostly remote since we formed back in 2016. Once we had a small concentration of employees in the Seattle area, it made sense to have some sort of a formal gathering place to collaborate as needed. The easiest solution was to rent out a small office with a co-working company. I won’t give the name here, but it’s one of the more prominent names. We weren’t sure how quickly we’d grow, so we opted for a month to month contract.
This arrangement worked well until March of this year when the world shut down due to COVID-19. Although the office space was cheap, it was obviously no longer a necessity. I reached out to the co-work management team to see if there was a possibility to suspend our account temporarily and then reengage once we were able to utilize the space. They let me know that they were busy but would get back to me as quickly as they could. In addition, they told me not to cancel until we had that chat.
A couple weeks passed and I hadn’t heard from them. I was reminded because the rent charge hit my physical credit card and showed up on my expense report (several weeks after the charge occurred). I logged into our account with the co-work company and tried to remove my credit card from the billing details. Wasn’t possible. They force you to keep a card on file, so I came up with a different solution. We had recently launched a new expense management program called Airbase which allowed me to easily spin up a special purpose credit card specifically for the co-work account. Most importantly, I was able to set the monthly spend limit to $1. This meant that is the co-work tried to charge the card, it would fail.
And…it failed. This sparked a conversation with the co-work about my late payment, and I reminded them about the pending discussion about temporarily suspending our account. They told me to continue waiting, so I did. Another few weeks went by, and guess what? Another failed charge. Another conversation, and another promise that they’d reach out. They never did. After the third failed charge I told them that we’d officially terminate our contract and remove any remaining belongings.
The co-work continued to charge the $1 card, and the charges continued to fail. Their collections team reached out to me to politely ask for money, and I gave them the context of our situation. They weren’t sympathetic and insisted that not only do I need to pay them the full amount assessed, that I was also locked into the contract for another several months because I had “signed a two year lease.”
They were wrong. I reviewed the contract, it was month to month, and after some further discussion about their verbal commitments to me they agreed that I had given notice of our termination much earlier and shouldn’t have to pay beyond that point.
Lessons learned: 1) Review your contracts, 2) Use virtual cards with adjustable charge limits! If I hadn’t been using a virtual card I would have had to try to get refunded for those additional payments, but the virtual card protected me from an unwanted renewal. Airbase lets you configure your cards with specific monthly, quarterly, or annual charge limits, and they also let you set a lock date in the future. This can protect you against unwanted software renewals just like it helped me avoid the monthly lease renewal.
I’ll probably end up writing more about virtual cards and Airbase in the future. They can help solve a lot of other problems for the operational side of finance and accounting teams as well. This was just one small win.