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Protecting Your Business Debit Card
While debit cards can offer a number of advantages to small businesses, they need to be protected carefully because business debit cards lack most of the legal safeguards limiting the liability from unauthorized purchases that consumer credit cards enjoy.
In fact, the debit card’s connection with your business checking account – often cited as one of the primary benefits debit cards offer – can place your funds at risk if your debit card or account are compromised.
Unlike a consumer debit card, a debit card linked to a business checking account is not protected under federal banking laws. And the fact that funds are withdrawn from the account immediately means your bank has to restore any funds that are removed fraudulent – a time-consuming process that can compromise your company’s cash flow if the withdrawal is large enough.
Business Debit Benefits
Managed properly, a business debit card can provide a number of benefits to your company, including:
Protection Is Critical
But despite the benefits and convenience, you also need to monitor and protect your account carefully because once funds are withdrawn from your account, it’s a lot harder to get them back than simply reversing a credit-card charge.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.
To reduce the risk of your business debit card being compromised, company owners should take the following steps:
By taking reasonable steps, you can enjoy the convenience of business debit cards while reducing the associated financial risks.