We live in a world where credit card fraud is the new normal. In 2018, the Federal Trade Commission received 167,000 reports from people who either experienced fraud on an existing credit card account or had an unauthorized credit card opened in their name. That’s just the number of people who reported the crime. The actual number of credit card fraud victims is undoubtedly much higher.
Although most people think of consumers when it comes to unauthorized credit card charges, businesses aren’t immune to this problem. Here’s the good news – the law is on your side if your credit card account is ever compromised. That is true whether you’re an individual or a small business.
Report Fraudulent Transactions
The first thing you need to know about unauthorized transactions on your business credit card is this. If your business card is ever used fraudulently, you need to react quickly.
These are the steps you should take if your credit card is used without permission.
Call your credit card issuer immediately to report the problem.
Your card issuer will likely shut down your old card number and issue you a replacement, in order to put a stop to any additional phony charges.
Dispute any unauthorized charges right away.
There’s a chance your card issuer could require you to sign a statement under oath swearing that you didn’t personally make the disputed purchases.
Follow up with a certified letter to dispute the unauthorized transactions.
Per the FTC, you should write to your creditor at the address listed for “billing inquiries” if you wish to dispute a fraudulent charge. The FTC also provides a sample letter you can use.
Finally, if your card is ever lost or stolen, don’t sit back and wait to see if fraud happens before contacting your card issuer. Instead, you should proactively reach out to your creditor to report that the card is no longer in your possession.
Business Credit Card Protections
Many laws which pertain to credit cards are written primarily with the consumer in mind, not businesses. On a personal credit card, for example, the Truth in Lending Act (TILA) protects you in the event your account is compromised. Per Regulation Z of TILA, your maximum liability for fraudulent purchases is capped at $50, as long as you report the fraud to your card issuer within 60 days or less.
Yet although TILA is largely a consumer protection law, parts of it can apply to businesses as well. Under TILA, unauthorized business credit card transactions may also be capped at $50, provided your situation isn’t an exception (see below).
If you have a small business credit card (aka you signed a personal guarantee for the account), here’s what this means. As long as you act quickly, you probably won’t be stuck paying for some criminal’s shopping spree if your business credit card is compromised.
Did you know that it may be safer to use a business credit card over a business debit card? Here’s why that’s true.
Exceptions to the Rule
Although you can often count on fraud liability caps to protect you if your business credit card is compromised, that isn’t always the case. In certain circumstances, you might be held liable for unauthorized charges, such as:
Your business issues cards to 10 or more employees.
Per TILA, your card issuer has the right to change the liability policy language in its contract if you issue cards on your business account to 10 or more employees. That doesn’t mean your card issue has to change its liability policy. It just means that it can.
If you do issue credit cards to 10+ employees, you should check your card agreement to see if your creditor has special rules for unauthorized charges made on your account. Depending upon the policies outlined in your agreement, you could potentially be liable for fraudulent charges made with your business credit card.
You gave the card to someone.
Did you hand your card over to an employee to fill up the company truck with gas, yet he turned around and bought $500 worth of lottery tickets? Maybe your employee was an authorized user on your business account, but he used the card in a dishonest way.
Unfortunately, if you gave someone permission to use your card or made someone an authorized user on your account, your card issuer will hold you responsible for the costs of any such misdeeds. You can revoke charging privileges or fire a dishonest employee, but you’ll still be liable for the purchases he made.
You fail to report the fraud.
Often, you’ll get lucky and your card issuer will catch suspicious activity on your credit card account for you. However, if an unauthorized charge doesn’t raise any red flags, your card issuer may not detect it.
The responsibility to discover and report fraudulent credit card transactions in a timely manner ultimately falls on you. If you wait more than 60 days to report unauthorized use of your account, you card issuer may expect you to pay.
Your business credit card is an important company asset. As such, you should do everything in your power to keep your account safe from potential abuse.
Here are a few tips you can follow to protect the security of your business credit card account.
- Keep your business card in a safe place at all times – either in your wallet or locked away to prevent unwanted access.
- Store statements or receipts with your credit card information in a safe location.
- Update the passwords on your computers and online accounts frequently (especially those which contain your credit card information).
- Only add trustworthy employees as authorized users on your account.
- Set up policies for authorized users so they know which types of charges are allowed on the account and what to do in the event of a lost or stolen card.
- Review your statements monthly and check your account activity online several times per week. This may help you detect unauthorized use quickly, if it occurs.
- Notify your card issuer in advance if you’ll be traveling or if your address has changed.
- Contact your card issuer immediately if a card on your account is lost or stolen.
You’ve worked hard to build a profitable business. Now it’s up to you to protect your business and its finances from crooks.
Remember, it’s your responsibility to sound the alarm when it comes to credit card fraud. No one else will ever care as much about your account as you do, nor will anyone be as affected as you if something goes wrong.
This article was originally written on March 20, 2019 and updated on December 10, 2020.