Debit Cards for Small Business
Help manage your business finances with plasticThe reason to consider debit cards for your business is the same reason you got one for your personal accounts: to keep better track of the money in your checking account. Debit cards – also called check cards and bank cards – work with either a personal identification number (PIN), grabbing money directly from the account, or with a signature like a credit card, with the withdrawal deferred by two or three days. Some debit cards offer both features.
You'll never pay interest on a debit-card purchase, and you won't have to manage petty cash. Here are other advantages over checks and credit cards:
- PIN-based cards protect against identity theft; they can't be used by a thief who doesn't have the number – unlike a credit card, for which a signature could be forged.
- In some areas, debit cards are accepted although checks are not.
- By entering transactions immediately in your ledger – electronic or paper – you know exactly where your finances stand.
Take the business debit card advantage
Know the limitations and the risksDebit cards aren't usually accepted for car rentals or other situations where the amount owed could balloon. Also, linking a debit card to bank accounts containing large amounts of money could be a risk if the card is stolen.
Think: small purchasesExperts say it's best not to make big purchases or to buy by phone or Web with debit cards. That's because it may be difficult to return items that don't meet your satisfaction – and there's no way to withhold payment, such as you have with a credit card or by putting a stop-hold on a check.
Electronic Fund Transfer Act gives debit-card holders some protections, such as the right to dispute an error on a bank statement and $50 liability if you notify your bank within two days of discovering your debit card is missing.
- Mistakes happen and you have less protection with a debit because the money is already gone from your account, so keep good records and reconcile your accounts monthly. Also, paying attention is important because the monthly and per-use fees for debit cards can add up quickly.
- Debit cards lack some of the flexibility of credit cards. For example, there is no "float," the interest-free period of up to 40 days between purchase and payment.
- Debit transactions can be completed only if funds are available in the account – an advantage when accepting customers' debit cards, too.
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