Debit and credit cards provide convenient and cost-effective payment and financial management tools for small business owners, but their ease-of-use also makes it vitally important to safeguard these cards (and your linked accounts) against unauthorized use and fraud.

Growing Popularity

The growing popularity of payment cards versus cash leads to a corresponding growth in payment-card-related fraud attempts, both by outside hackers and, in the case of businesses, by employees.

Estimates vary about the amount of payment-card fraud committed by team members, but some common problems include:

  • Personal transactions being disguised as business expenses
  • Personal transactions being committed by unauthorized users
  • Purchases from non-preferred vendors, such as travel upgrades that don't conform with company policies or preferences.

The growing risks make it important to understand not only how your company's debit or credit cards can be used inappropriately, but also ways to help protect your company and the banking accounts linked to your payment cards.

For starters, it's a good idea to talk to your banker about the cards your company uses and the associated fraud protections. A business debit card, for instance, may not have the same mandatory safeguards against unauthorized transactions as a credit card, but many banks offer liability limits and similar protection.

It's also a good idea to be aware of phishing or "smishing" schemes in which someone will send a fraudulent email or text message asking you to log into your account. Your bank won't send you this type of message, so treat any requests to access your account via a link embedded in a message suspiciously.

In addition, take advantage of the security features built in to the latest-generation EMV "chip” cards. These cards encrypt expiration dates and similar identifiable information with each transaction, making transactions more secure than those completed with a traditional magnetic-strip card. Even if an EMV card is lost or stolen, it can't be used for unauthorized transactions.

Safeguarding Your Accounts

Banks and the payment card associations recommend a variety of additional steps to help protect your debit and credit cards against unauthorized use:

  • Store your company cards in a safe, non-public location, and protect your account with a hard-to-guess PIN number.
  • Monitor your account and watch for unusual or unauthorized activity.
  • Report any suspected problems to your bank immediately.
  • Sign your cards as soon as they arrive, and shred any older cards.
  • Sign up for dollar-amount transaction limits on your account.
  • Restrict cash withdrawals or international use of debit cards.
  • Use a credit card or central service to book travel reservations, which can reduce the volume (and cost) of employee-booked travel.
  • Consider disabling overdraft protection on debit or credit cards, which could allow additional accounts to be breached during fraudulent transactions.
  • Be sure to use reputable ATMs with the names of banks you recognize. Generic, unbranded ATMs may carry a higher risk of "skimmer' card readers or fraudulent software designed to capture account information.

With some prudent risk management, debit and credit cards can increase your small business' financial flexibility without opening the door to fraud and unauthorized use.