How to Protect Your Business's Credit Card Account
Whether it’s fraud, identity theft, or simply misuse of business capital, credit card issues can jeopardize your business. To help you protect your business’s finances, we’ve compiled this list of are six ways to avoid credit card account problems.
6 Ways to Protect Your Business’s Credit Card Account:
1. Don’t Carry a Balance on Your Business Credit Card
Carrying a balance on your personal credit card results in high interest rates, fees, and larger payments. The same goes for your business credit card if you don’t pay your balance off in full each month.
Not paying your balance in full usually means you’ll be paying very high interest rates — as much as 20 percent or more — on your credit balance. These rates are far higher than the rate you’d pay on most business loans or lines of credit.
In short, by paying off balances at the end of each billing cycle, your small business keeps more of its own money.
2. Don’t Give Your Card Number to Anyone
As trust grows within the organization, it becomes easy to give an employee your business credit card number. Don’t do this.
If you want someone else in your company with authority to make purchases, give them their own card with a set limit. This has two benefits. First, it enables you, the owner, to set limits on the card. Secondly, your employee’s credit use doesn’t tap into the available credit on your card.
While we aren’t saying that you shouldn’t trust your employees, it’s just good practice to keep your card number private to minimize the chance of the number falling into the wrong hands.
3. Use Two-Factor Authentication (2FA) on Business Bank Accounts
Two-factor authentication, commonly referred to as “2FA”, is the best way to protect your bank logins. Doing so protects your business credit card as well because your bank account is likely linked to your card.
If you’re unfamiliar with 2FA, it’s simply an additional layer of security on top of your normal password. Here’s how it works (using a bank as an example):
- You sign in with your username and password like normal.
- After entering the correct username and password, the 2FA will either:
a. Send you a text with a confirmation code.
b. Direct you to type in a six-digit code via an authenticator app (from Google Play or iOS).
These steps make it much harder for hackers to infiltrate your bank accounts because, in addition to your password, they’ll need access to your phone. The good news is this technology spans beyond banking accounts. You should use 2FA for any online account that’s linked to your business credit card.
4. Separate Business and Personal Transactions
The easiest way to keep track of business and personal finances is to separate them at the start. While the initial benefits may seem obvious, the secondary benefits are important too.
For example, you likely know that it’s best practice to buy business items with your business card and personal items with your personal card. This helps keep expenses separate and streamlines bookkeeping.
In addition to that, with both categories of spending separate, you’ll be able to recognize when an unauthorized transaction happens on your business credit card. For instance, let’s say you own a construction company and only use the business credit card to pay for materials on the job site. If a charge for groceries and a smoothie appears on that same card, you’ll know it’s fraudulent.
Often, noticing fraudulent activity as soon as it happens is the best way to stop the issue before matters get worse.
5. Monitor Employee Card Usage
In the second tip, we discussed the importance of not giving away your credit card number. However, we did suggest getting other credit cards for your employees that need them. If you’re going to do this, you must monitor your employees’ card usage.
Too often, you’ll see stories in the news about employees spending company money on lavish dinners, luxury events, or scandalous activity. Still, you don’t have to monitor every single transaction. Instead, you can set ranges where you’re notified if spending is over a certain amount per transaction. Ultimately, you should periodically check in on employee card usage to ensure that your company’s money isn’t being misused.
6. Use Common Sense
At the end of the day, nothing beats using common sense.
If you suspect something suspicious is going on with one of your employees’ spending habits, talk to them. If you notice transactions that don’t seem to be for business expenses or that are out of the normal spending ranges, dig deeper to ensure they are valid charges.
Review your statements periodically and ask your employees to do the same if they have access to a business credit card.
Conclusion: Make Monitoring Your Business Credit Card Account a Habit
When in doubt, be cautious with your business credit card. Although it takes some work to keep everything above board, it’s much cheaper and less time-consuming than dealing with the nightmare of fraudulent charges.
In addition, business credit card issues tend to get much worse when you let them go too long. In some cases, you could be forced to work with the credit bureaus to reverse the damage to your credit history, and no one wants to deal with that.
Do you have any other tips for managing your business credit card account? Share them with us in the comment section below!
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.