Protecting Your Business Debit Card - 1st Source

A debit card can be handy for your business, but it must be used carefully. You see, business debit cards lack most of the legal safeguards that consumer credit cards have for limiting the liability from unauthorized purchases. In fact, a debit card linked to a business checking account is not protected under federal banking laws.

Why Have One for Your Business

Managed properly, a business debit card can provide several benefits to your company.

  • Streamlining purchases. It’s easier for employees to make small purchases with a debit card than managing petty cash or reimbursing personal expenses.
  • Managing travel expenses. You can set dollar or location limits for travel-related purchases and reduce the need for post-travel reporting and record-keeping.
  • Online account monitoring and alerts. You can see what’s going on with your company’s spending in near real-time via apps or the web.

Protection Is Critical

Despite the benefits and convenience, you must monitor and protect your account carefully because once funds are withdrawn from your account, it’s much harder to get them back than simply reversing a credit-card charge.

Federal banking regulations, including the Electronic Funds Act, have established a $50 limit on the fraudulent use of consumer debit cards, but the act doesn’t offer similar protections for business debit cards.

The payment card companies have developed voluntary zero-liability programs, but those require businesses to protect their cards from loss or theft, and to report any loss or theft to your bank promptly.

While these protections should help in most instances, money can be removed from your account before you discover the loss or theft of your card – and those funds won’t be restored until your bank investigates the fraudulent use.

Reduce Your Risk. Take The Following Steps:

  • Establish transaction limits for spending categories, amounts or locations you’re unlikely to patronize.
  • Turn off debit cards on weekends or other periods employees won’t need to use a company debit card.
  • Create account alerts for large purchases.
  • Avoid withdrawing funds at off-brand ATMs or ATMs not in banks because those are more likely to have been compromised by card readers known as skimmers.

Bottom Line

Your business should take full advantage of the benefits and convenience of business debit cards, but be smart about it. Understand the risks and take the necessary steps to avoid serious problems. Make sure your employees follow the guidelines you’ve established and make sure you have quality control measures in place.