Debit and credit cards for your business
Drawbacks of debit and credit cards
Using business credit or debit cards to make payments can bring a range of benefits, but you should also be aware of the disadvantages.
Even though you can usually set maximum spending limits on cards you issue to employees, remember that you're giving them the opportunity to spend company money unchecked. There's the risk they could purchase unsuitable or unnecessary items which can't be returned.
At the very least, it's a good idea to combine card use with a normal reporting system to minimise the risk of unnecessary transactions. But it may be worth looking for cards that allow you to place restrictions on the purchase of certain things such as petrol, as your business has to honour every payment made by employees using the cards, regardless of whether you authorise it or not.
And, as with any personal credit or debit card, you are also open to the possibility of two other major drawbacks.
- Card fraud - if the card details are discovered or revealed, you may find many purchases worth thousands of pounds wrongly appearing on your statement. Even if this is due to an employee's negligence, your business will still be liable for the payments. In addition to the potential financial loss, such situations can be time-consuming to resolve. You can get tips on preventing card fraud on the Card Watch website - Opens in a new window.
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Debt - with the convenience of a plastic card and the time lapse between purchase and payment, it can be tempting to overextend yourself and build up debts for the business.
Remember, too, that if you make purchases with a credit card and don't pay off the bill in full, you'll incur interest charges, which can easily mount up.
Subjects covered in this guide
- Introduction
- Types of card available
- Business benefits of debit and credit cards
- Drawbacks of debit and credit cards
- Choosing a card provider
- Risks of financing a business with a personal credit card
