What are they and how to get one for your business

In recent years, the convenience of a charge card has made it easy for many business owners to access their business checking account capital seamlessly and easily without having to write a check. Here’s what you need to know about business debit cards.

What is a business debit card?

A business debit card is a payment card that allows you to access funds in your business bank account to make purchases and withdraw money. Business debit cards are often popular with business owners who want the convenience of a charge card, but don’t want to make all of their purchases with a credit card. A business debit card will carry a Visa or Mastercard logo, allowing it to be used by the cardholder anywhere such cards are accepted.

Types of business accounts

A business debit card withdraws money from your linked bank account, which is usually a business checking account. It’s a good idea to have a business savings account as well, but it’s not necessary to get a debit card.

Other options may include business deposit cards that can be used for making deposits or business ATM cards that can be used for cash withdrawals at an ATM.

How do I get a debit card for my business?

You may not even need to apply for a debit card. Most financial institutions automatically issue a business debit card when you open a business checking account. In addition to banks, credit unions and some online financial service providers offer debit cards when you open a checking account. (Online business bank accounts have become more popular with business owners who don’t want to visit a bank branch, and there are plenty of options with features aimed at small business owners.)

If you don’t have a business bank account, you’ll need to open one first to get a business debit card.

Note that a debit card is different from a prepaid card. With a prepaid card, you load funds onto the card so that you can then spend those funds.

Things to consider when choosing accounts for your business

Opening a separate account for your business is a crucial step in helping your business look and function professionally. Business debit cards can also be extremely useful for separating your business and personal finances and for tracking purchases for accounting purposes.

Here are some questions to ask yourself before opening an account:

What are the fees? There may be a variety of fees associated with the account, including:

  • Monthly maintenance fees
  • Transfer fees
  • ATM fees
  • Overdraft fees or NSF
  • Cash handling fees
  • Excess transaction fees
  • Statement fees
  • Annual fees

Note that even free business chequing accounts can come with fees, but there may be ways around them. For example, you may be able to avoid monthly maintenance fees by maintaining a minimum average daily balance. Or you might be able to add an overdraft line of credit to avoid bad checks and incur insufficient funds charges (NSF or overdraft). You’ll always want to read the fine print so you won’t be surprised by unexpected charges.

How many transactions will I make? What kinds? As you can see from the list of possible charges, you’ll want to make sure you avoid unnecessary charges by choosing the right type of account.

Will I earn interest? While interest rates are low on deposit accounts these days, something can be better than nothing. If you plan to maintain decent sized balances, you might want to look at the Annual Percentage Return (APY).

Will I need to use a branch to deposit money? If your business relies heavily on cash sales, you may want to choose a financial institution with a convenient branch to make these deposits. You will also need to know the fee schedule for cash deposits. (Cash handling fees can only apply to transactions over a certain limit.)

Do I have to withdraw money? If so, you’ll want to make sure the ATM network is convenient and inexpensive. Otherwise, you risk paying expensive ATM fees for off-network (aka “foreign”) transactions. Some financial institutions reimburse ATM fees up to a limit.

Is it compatible with mobiles? The ability to access online banking features should be a given, but if you plan to access your account frequently from your mobile device, you’ll want to check the mobile app’s app to make sure it has the mobile banking functionality you need. If you want to deposit checks without going to the bank, make sure mobile deposit is also available.

How easy is it to open an account? Some issuers make it easier than others to open a professional bank account. Keep in mind, however, that all financial institutions must comply with banking regulations to verify customers, so be prepared to share both business and personal information when opening a business bank account.

Will it integrate with other systems? Another consideration is whether the account will integrate with your accounting software. The ability to easily import transactions can make it easier for you or your accountant to keep your accounts up to date.

Which business debit card is the best?

Most financial institutions automatically issue a business debit card when you open an account. So your choice is usually not: “Which business debit card is better?” But rather which business checking account is best for your business. The debit card is an extension of the account.

That said, there are some features you might want to look out for, including:

  • Virtual account numbers: These allow you to create unique account numbers that can be used with specific merchants, to pay for subscription services, etc.
  • Sub accounts: Instead of having to open multiple bank accounts for budgeting purposes, you can use these sub-accounts to set aside funds for specific taxes or spending goals.
  • Employee checks: Find out if you can restrict employee purchases to certain expense types and / or set spending limits.
  • Awards: Credit cards generally offer higher rewards than debit cards, but some debit cards offer rewards programs. Typically, rewards are tied to card transactions for which you do not enter a PIN. In addition, some issuers offer welcome offers for new customers. However, since opening a new bank account is complicated, choose your account for the long term and not just a short term bonus.

Some large financial institutions may offer more than one business debit card program. One card may offer rewards, for example, or employee cards, while another may be more of a no-frills card.

What are the protections against fraud?

Debit cards are different from business credit cards in that they draw on funds from the linked bank account. Business debit cards are not covered by federal law for unauthorized use. Instead, issuers typically offer zero liability policies. Read the disclosures you receive to find out what to do in the event of fraud. Don’t wait for this to happen to you!

Keep in mind that if you give cards to employees, you are responsible for the fees they charge. Just because you do not approve purchases made by an employee with the card does not mean that they are considered unauthorized purchases.

It should also be noted that the choice of “debit” or “credit” at checkout may affect the way certain transactions are processed if you are to enjoy zero liability coverage, so, again, read the disclosures.

Finally, current business accounts may be covered by insurance from the Federal Deposit Insurance Corporation if the financial institution is a member of the FDIC. This coverage will be subject to specific limits.

Can business accounts have debit cards?

Small business owners rely on a variety of financial products to operate their business and manage their cash flow, including business bank accounts, credit cards, small business loans, and more. And yes, debit cards are one of those tools. So yes, business accounts can have debit cards, and many business owners are looking for them. Be sure to study the options for choosing the right account (and the right card) for your business.

This article was originally written on October 6, 2021.

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