Mitigating Risk and Fraud With Company Credit Cards

Katie McBeth  | 

You’ve finally made the decision to get a company credit card. Your business has been prospering, and your employees are eager to come to work in the morning. Month after month, quarter after quarter, things are looking up.

Now you’ve come to the milestone where employees can be trusted with a company credit card, but you’re wary to make the transition. Credit cards are an easy way to expose your business to predators, lose money, and potentially open your business up to attacks from hackers. There’s a lot of risks with credit cards, and are they worth taking?

Despite the risks, business credit cards are an important addition to any company. They can help keep your spending and finances in check, as well as create a cash cushion for when you need the extra help. Keeping the benefits in mind, how can businesses ensure that their card is used properly, and that their information will not be stolen? How can businesses ensure that their credit score won’t be harmed when they hand over their credit card to an employee?

Internal Fraud

When it comes to internal company credit card fraud, the most likely source of fraud is an employee that is misusing their card. Although it is important to show trust to your employees and to provide them with autonomy, it’s equally important to strictly monitor funds and require receipts from every transaction to ensure nothing slips through the cracks.

Additionally, make sure every employee that is an authorized user has their own unique card and knows not to let other employees borrow their card. Setting up strict rules on how the card can be used could help prevent any misunderstandings. Always cancel and shred cards after an employee has left the business.

Some of the best practices for avoiding internal theft and fraud is to require receipts for every company card transaction. This can help prevent what is known as “double dipping,” or when an employee uses the company card, but still issues a receipt for reimbursement. In addition, make sure the accountant in charge does not have access to the company credit card, or that their access is monitored by yourself or a secondary accountant. This way everyone can be held accountable, and purchases can be double checked before being approved.

External Fraud

Of course, outside threats do exist as well, and it’s important to follow similar precautions as you would with your personal credit card to avoid fraudulent charges. This includes setting up two-step authentication on all your credit card accounts, and signing up for fraud protection and alerts with the credit card company. Be aware of potential online scams when ordering online, and using email. It is also important to always monitor your account for any suspicious activity, and to report any potential fraudulent charges as soon as possible.

Be aware that business cards don’t always offer the same protections for their users as personal credit cards do. It’s important to read the fine print and know where your issuer stands in terms of fraud protection, particularly in regards to the Electronic Funds Transfer Act (EFTA)1.

Luckily, many of the most popular cards offer what is known as “Zero Liability*” for both consumers and small business cards. This provides protection from unauthorized use, loss, or theft to those that report concerns within a timely manner, and those that show reasonable care for protecting their card number. Double check with your card issuer or network that Zero Liability applies to you.

Keeping Your Score High

One of the most detrimental parts of credit card fraud is the damage it can do to your business credit score, and your personal score in turn. The money might be protected, but how the credit bureaus appraise you can change dramatically after your information is stolen or used improperly.

To ensure your score stays high, create a daily or monthly credit card limit for your employees. This will help you prevent overspending, keep your credit utilization ratio down, and can help deter employees from using it for nefarious purposes.

If your credit cards have been hit with fraud, or past employees have already hurt your credit score, work with your creditors to improve your credit score over time. Additionally, get a full report of your business credit score and be sure to check it for any inaccuracies. If you find any, be sure to contact the credit bureau immediately and ask to dispute the claim.

By being diligent about how your business credit card is used, as well as setting important boundaries for your employees, there’s no reason you can’t open up your company credit card for employee use. You can avoid risks by being a responsible business leader, and your business can benefit with the inclusion of a small business card.  

*Commercial cards (traditionally prepaid funds cards) may be exempt from this clause, but commercial cards and small business cards are different. If you use a commercial card, be aware that the “Zero Liability” promise doesn’t apply to your card2


Sources:

1. https://www.federalreserve.gov/boarddocs/supmanual/cch/efta.pdf<

2. http://www.investopedia.com/terms/c/commercial-credit.asp<

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Katie McBeth is a researcher and writer out of Boise, ID, with experience in marketing for small businesses and management. Her favorite subject of study is millennials, and she has been featured on Fortune Magazine and the Quiet Revolution. She researches SEO strategies during the day, and freelances at night. You can follow her writing adventures on Instagram or Twitter: @ktmcbeth

This post was updated May 1, 2017. It was originally published May 3, 2017.