Managing a small business with cash only can be a dangerous proposal. It can be unsafe to carry large amounts of cash to make payments and buy things you need for your business, and a daily trip to the bank with loads of cash can be cumbersome.
Having a business debit card and a business credit card can make paying everyday small business expenses a lot easier. There are pros and cons to each, and it’s important for business owners to realize that some of the consumer protections they have as individuals don’t necessarily apply to businesses.
Debit CardsA debit card accesses a checking account, just as a check does, and pulls money out of the account for the transaction. It doesn’t incur debt as a credit card does. Unfortunately for small business owners, they have less protections under federal law than consumers do with debit cards. Consumers with debit cards have limited liability if the card is lost or stolen, but business account holders don’t.
Business debit card owners should understand their bank account agreement on liability for unauthorized transactions. The
Business Debit Mastercard® through Rockland Trust comes with all
business checking accounts and can be used anywhere Mastercard is accepted.
It offers zero liability to protect from unauthorized signature-based transactions; purchase insurance up to $1,000 from damage, theft or loss for up to 90 days; extended warranty coverage for one year; and reimbursement for rental car damage or theft if an eligible card is used.
The debit card also offers perks from Mastercard, including emergency roadside assistance, travel assistance, and refunding value-added taxes paid during foreign travel for business.
Credit CardsFor small business owners paying for everyday expenses such as office supplies all the way up to business travel, a credit card can make more sense. A credit card allows you to defer payment until the balance is due, and you don’t have to have the charge amount available in a checking account, for example, as you would to pay a debit transaction.
You’re using the credit card issuer’s money until you pay off the balance, so you could incur fees and interest charges if the bill isn’t paid on time. Paying the bill on time will also improve your company’s credit record. A credit card may also offer rewards that a small business owner can use, even if their employees use the card for business expenses.
There are different types of credit cards. One type is issued mainly for consumer use, such as personal or family use, though it can occasionally be used for business purposes. Another type of credit card is used primarily for business use, though it can be used for the occasional personal purchase.
Rockland Trust offers small business owners a Platinum Visa Business Credit Card that has many benefits, including reward points, travel rewards, multiple layers of security, auto rental collision damage waiver, travel and emergency assistance services, and small business online workshops.
ProtectionsThe federal Truth in Lending Act, or TILA, offers credit card protections for consumers, but not for business credit cards. These include limits on penalty fees for late payments and over-the-limit fees. Some card issuers may voluntarily extend some consumer protections to business cardholders, but they’re not required to, according to the
Federal DepositInsurance Corporation (FDIC).
If a thief uses a stolen business credit card, the liability for unauthorized use can be higher than it would for consumer cards. TILA limits a consumer’s liability to generally no more than $50. But if a company has 10 or more credit cards for employee use, the business may be required to assume unlimited liability for unauthorized transactions, according to the FDIC.
If fewer than 10 credit cards are issued by the company, the $50 limit will apply for unauthorized use by someone other than an employee. If the employee is the culprit, TILA rules set no restriction on the potential liability for the employee or business.
