Debit Cards vs. Lifestyle Spending Accounts: An Honest Comparison

Every year people come to us at Compt and ask, “What is the difference between personalizing perks with debit cards vs perk stipends?"

It’s an excellent question. We understand the need to know the difference as it is a choice that most HR professionals are going to have to live for quite some time, as rolling out compensation-based tools to your team is no easy undertaking.

At Compt, we only sell software which helps companies set up, manage, and scale their perk stipends, but the truth of the matter is that it might not be the best fit for you. In fact, using debit cards might be a better option for you.

This article is going to explain the pros and cons of each, debit card and lifestyle spending accounts, in an honest and transparent manner. This way, by the end, you’ll be able to identify which is the best for you and your organization.

zestful debit cards vs compt

Debit Cards

debit cards perks

Debit Card Vendors:


No receipts

With a debit card, because all purchases are made through the company-provided card, no receipts are required for reimbursement.


Some employees crave status with others, especially their peers, and a company credit card can look like a status symbol. The optics of cards can be really cool, especially when used at stores in front of their friends or family.

Potentially unlimited options for spending 

If the debit card you choose allows for no restrictions, employees can use them on expenses they want when they want. If they can walk into any restaurant and buy their lunch on the company, or any clothing store they walk by, that’s pretty cool. It allows for spending in the moment of need, which is where a debit card truly shines. However, if this on-the-spot spending matters to you, make sure you’re choosing a debit card that allows for 100% open-ended spending anywhere. Many of the debit cards available must be used for a particular set of vendors available on their platform.


HR CON: Require accounts to be prefunded (aka frontloaded)

Debit cards require that you pre-fund them so that the team has funds available when they go to make a purchase. Typical usage rates of debit cards are 15-20%, but you are locking up your cash for 100% usage for that period. If a company offers $100/month to its 1,000-person company, this means that you are essentially allocating and locking up $1.2M, rather than paying for items as they are purchased. This could cause some serious heartburn for a finance team.

HR CON: More costly to manage

These are higher because you are paying for the hardware of the card, as well as the cost of the software resulting in higher rates per employee, as well as additional card-related fees.

HR CON: Limited by vendors included on the platform

Since most of these models are vendor-based, your people are limited to select from the pre-determined vendor list curated by the platform. This means if they want to support family, your people likely cannot buy takeout at a local restaurant, drive-in movie passes, or a spur of the moment ice-cream treat for the family.

HR CON: All purchases are approved, regardless of what is purchased

Since people purchase perks in the moment, everything is approved regardless of what they spend their money on, which means no ability to reject purchases and limited controls for the company. If you are trying to align your perks with your culture, this can be a challenge, however, this can also be a pro if you don't care what your team is using this perk money on.

HR CON: Not scalable for larger organizations

Depending on how many employees you have, setting up and replacing cards can be a burdensome task.

HR CON: Potentially not compliant with IRS tax law

Unless cards are limited to commuter benefits (up to IRS limits), continuous learning, or cell phone reimbursement, it is nearly impossible to have these perks be tax compliant. Most items that an employee would purchase require both employer and employee payroll taxes to be applied. If an employee is making personal purchases on a debit card, it is nearly impossible to track what items they should be taxed on. And since this does not automatically run through payroll, there would have to be a separate tracking and payroll processing procedure to ensure that employees were paying their taxes correctly. This is not part of the debit card process and would have to be a separate tracking within the finance and HR team. 

Other questions to ask when evaluating debit/credit card perk softwares:

The following are some other questions which have come up for us in conversations, but we’re not sure as to the answer:

  • What happens to the debit card and the remaining balance when an employee is terminated or leaves the company?
  • What happens if they are purchasing something and do not have enough money on the card to cover it? It an be tough trying to spend the final dollars or cents on a card in a meaningful way.
  • Do people really want another card in their wallet? Everyone from Uber to Apple now has credit cards available and most people aren't trying to add cards but remove them.
  • Can people get points on these debit cards like they can with using their credit cards?
  • What happens if a debit card is lost/stolen and someone other than the employee spends the balance. The money is gone, but do employees get a new card with their remaining balance set up? How will a company account for the additional expenses?
  • Are multiple stipends possible (e.g., one for health & wellness and continuous learning), and how does the debit card know which category to apply the spending to?
  • If there is spending on pre-selected vendors, how is their approach different from using gift cards?

Perk Stipends:

Note: The information below is related to the lifestyle spending account approach using the Compt software as it is currently the only perk management software using reimbursements. 

Perk Stipend Vendors:


Unlimited options for spending

Because team members are buying what they want and submitting an expense, their options for purchasing are unlimited. From Spotify to daycare costs, student loan repayments, individual pet insurance providers, and more, they can buy the perks most relevant to them and their always-evolving needs while spending in categories predefined by you.

You only pay for what gets used; the rest is kept in the business

Because Lifestyle Spending Accounts reimburse employees after the money is spent, there are no funds sitting in another bank account that you can’t access. Plus, since you only pay for what gets used (a use-it or lose-it approach), you’re always at or under the budget.

Here’s an example of what this looks like in practice: you give your employees $300/quarter to spend on health & wellness. An employee spends $250 during the quarter and uploads their receipts. On the first day of the new quarter, they receive a new $300, but the balance remaining from the prior quarter is no longer available. As a company, this ensures that you always know your maximum cash exposure, but also keep all of those funds in your bank account until it is time to run payroll for your team. None of your funds are ever held by Compt. 

Reimbursement model

There is a reason the reimbursement model is still the most popular method for benefits management. It’s because the reimbursement process:

  • only takes a few minutes for employees
  • provides HR with a wealth of information they need related to approving purchases
  • tracking taxes to ensure 100% tax compliance
  • and it’s also how true personalization is possible.

Related to the last item, not everyone uses the same gyms, tv-streaming services, mental health apps (there are over 10,000 in the Apple store), and reimbursement allows people to pick the vendors they want and need without them being needing to pre-approved by som vendor marketplace.

Expenses can be reviewed before being approved

If a purchased perk does not fit within perk spending guidelines, they can be rejected.

Set-up multiple stipends at once

The goal with lifestyle spending accounts is to create one or more stipend that align with your company’s mission, vision, values, and goals. For example, set up a one-category stipend that aligns to specific goals like “health and wellness.” Or align a stipend to a cultural value at your organization, like an “Always be learning” stipend, or develop a general stipend like “Treat yo-self” (this is a real stipend name from a customer of ours) where multiple spending categories are offered.

Member grouping settings 

You can create groups of members based on location, job function, awards they’ve won (like President’s Club), or anything else. With these groups, you can create specific stipends like a “Remote employee” stipend or a “new hire tech” stipend so that you created an automated process for supporting people wherever they are in their employee lifecycle, or their location, career-journey.

100% tax compliant

Team members must select categories when uploading their perk receipts, which makes them 100% tax compliant. With the Compt functionality, not only are your perks always 100% tax compliant, but you can decide between who pays the taxes (e.g., the company grossing up vs. the employee).


  • Reimbursement

HR CON: Reimbursement

While it was added to the pro list, it can also be considered a con because it does take a few minutes per employee to upload their perk receipts.

Considering a new approach to perks?

Whether it's selecting a debit card/gift card option, vendor marketplace, discount platform, or Compt -- our goal is to help you choose the best perks program for your situation. That's why we've created this helpful comparison graphic.

Click here to download the Perks Approach Comparison Graphic