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Avoiding small business credit card ID theft: 6 rules to follow

By , CardRatings contributor
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    As Identity Theft Grows, Companies Must Do MoreMost consumers don't need to be reminded that they need to be careful that identity thieves don't get their credit card information. Chances are, you keep your computers and devices loaded up with anti-virus software. You're careful about who you give personal information to. You don't leave your credit cards lying out in public view.

    But do you have that same mindset when you're at work? Identity thieves aren't only working to invade the home front. They'd also be happy to filch the credit cards of business owners and their employees.

    In fact, businesses are increasingly encountering identity thieves and thieves, period. You've probably heard about the numerous ransomware stories in the news in which a business, school or some other organization's computers will freeze and become unusable - unless a ransom is paid to the hackers, who will then unfreeze the computer. And there appears to be a serious uptick in business identity theft in recent years, at least with attempting to file a false tax return for a business. According to the Internal Revenue Service, in 2015, this happened 350 times; the following year, 4,000; in 2017, 10,000 false business returns were filed.

    So if you run a business or are employed for one that has given you a business credit card and you're worried about small business identity theft (as you probably should be!), here are a few things to keep in mind in order to protect your small business from identity theft.

    >MORE: 5 reasons you need a small business credit card if you're self-employed

    Are businesses more at risk than consumers for credit card fraud?

    Personal ID theft seems to get all the attention in the media, but it's probably a good thing for business owners and employees to remember that con artists aren't necessarily out to ruin people's lives. They simply want money. In other words, to them, stealing an identity is just business. And businesses have money.

    It's hard to nail down an average credit card limit for the average consumer, but a couple years ago, Experian, one of the three main credit bureaus, suggested it the average limit was $8,071. So let's say that you have $8,000 for a credit line. Well, your business might have a credit line of $80,000 - or far more. A criminal would be happy with your $8,000, but he or she likely to be far more excited to steal some or all of your $80,000.

    Michael Foguth doesn't need the reminder. He owns Foguth Financial Group, a retirement planning firm in Brighton, Mich.. He has 11 employees and eight of them have business credit cards.

    Over the years, he says that he has had an employee lose a card and has found a healthy number of fraudulent charges on credit card statements made by criminals, apparently hackers, who have managed to access their business credit card account.

    A couple instances really stand out, Foguth says.

    "We once had a $1,000 charge from Southwest Airlines. The odd element to this fraudulent charge is that it wasn't caught until there was a refund for the charge. We have notifications set up for all refunds and that is how we caught it," Foguth says.

    Another time, Foguth found a $500 charge for a printer with all the bells and whistles that someone bought from an electronics store and had shipped to their home address.

    "On that specific case, the credit card company wasn't even going to follow up, and I was told that it was cheaper for them to charge back the merchant than to try and catch the thief. That was shocking," Foguth says.

    Rule #1: Carefully check your personal card statements AND business credit card statements each billing cycle to ensure there aren't fraudulent charges sneaking through.

    Do you have a plan in case your business credit card is stolen?

    Nobody likes to plan for the worst, but you'll be glad you did if something bad happens.

    "Even a small business should have in place human resources guidelines for the use of credit cards, and in the employee orientation, the policy should be discussed," says Denise Beeson, who owns How To Associates, a Santa Rosa, California-based consulting practice that specializes in finding funding for small businesses.

    Too many business owners don't do this, she adds.

    If you're the owner of a business and are wondering what those guidelines should be, that's obviously up to you and what makes sense for your company.

    Foguth says that if something happens to one of the company's business credit cards, the policy is that employees contact him immediately (with eight cardholding employees, and not, say, 800 employees, that's not difficult). Then Foguth makes the call to the credit card issuer to report the loss and to work on getting a new card.

    "I, as the business owner, would place the call to the credit card company because I am the only one who can authorize a replacement card," he explains. "This is a best practice because it ensures that the account and credit cards stay secure."

    Rule #2: Ensure everyone who has one of your company cards knows (and follows!) the rules about how to use the card and what to do if that card is lost or stolen.

    What is the difference between business credit cards and corporate credit cards?

    This may be a good time to point out that business credit cards and corporate credit cards are two separate things, even though, yes, they're both used in the business world.

    The main difference is that with a business credit card, the business owner - and possibly his or her credit score - is on the hook if the bill somehow isn't paid. If your employees run amok and spend far more than you wanted, as far as your credit card company is concerned, you're financially responsible. Your employee, even as an authorized user, generally doesn't have to worry about his or her credit score. Still, as with applying for any credit card, read the fine print and talk to customer service if you want to know exactly how your personal credit score may or may not be affected if something goes wrong with the payments.

    With a corporate credit card, if the bill isn't somehow paid, the company is financially responsible.

    "Sounds good," you might think as you do a maniacal laugh: "I'll get a corporate credit card, and if I miss a few payments, my credit won't be ruined. Bwhahahaha…"

    But, alas, sorry, that's not likely to happen. Credit card company executives weren't born yesterday on some turnip truck; corporate credit cards are generally given to corporations with millions or billions of dollars in revenue. So corporate credit cards are a significantly harder to come by, whereas business credit cards are much easier to apply for, especially if you have good credit.

    In fact, many entrepreneurs, contract workers and freelancers can easily qualify for a small business credit card.

    Rule #3: Know that, as a small business owner, your small business credit card (and how your employees use it) could affect your personal credit score.

    What do you do if your business card is lost or stolen?

    As noted, somebody needs to call the credit card company (and maybe the police), and that phone call should be done as quickly as possible to minimize any financial damage. Generally, consumer credit cards have more protections on them, but even with a business credit card, as long as you contact your credit card company within 48 hours, the most you will likely be liable for is $50. If you wait longer than 48 hours, your business may lose as much as $500. All of that said, most major business credit cards have a zero-liability policy (as do most major consumer credit cards), and so odds are, if something happens to your card, and some unscrupulous jerk gases up his car with your business credit card or buys a condominium, you won't actually lose any money.

    And having policies in place for your business credit cards is important, even beyond identity theft, Beeson says.

    For instance, you probably don't want employees overspending with a business credit card. Beeson says that many business credit cards allow you to set a spending limit for individual employees, and you can receive an alert if the cap is reached. That might help remind an employee to not go on a business trip and order the filet mignon for every meal.

    Ironies do abound, however, with business credit cards as you've probably noticed. If you owned a shop, and if a crook used somebody else's business credit card to pay for an expensive vase, the cardholder would get their money back. You, however, will not necessarily get the money back to replace the stolen vase. But if someone takes your business card and buys an expensive vase with it, you or your employee shouldn't be out any money.

    Rule #4: Establish rules for credit card use among your employees and consider setting employee limits if your particular credit card allows for that.

    Are business debit cards as safe as business credit cards?

    When it comes to business debit cards, you're playing a whole new ball game, one in which it's the bottom of the ninth, the other team has the bases loaded, and your pitcher just broke his arm. In other words, it's especially important to call your credit card company if you or an employee loses a business debit card or has it stolen.

    Frankly, if you're a business owner with employees, they probably shouldn't have access to a business debit card because of the risks, which are far greater than consumer debit cards.

    If a consumer debit card is stolen, just as with a credit card, the most a consumer can lose out of their checking account is $50 or $500, as long as you it within that 60 days and preferably within the first 48 hours. HOWEVER, if you fail to report a stolen debit card for 60 days, there's is NO protection and your checking account could be emptied.

    But if a business debit card is stolen, and a business's checking account is emptied, there are no federal laws protecting it. You could lose it all.

    Rule #5: In general, a business credit card is going to be a much safer choice for your business.

    Remember to monitor your business credit card account

    Even if you're a "solopreneur," working on your business with no employees, you'll want to monitor your credit card account pretty frequently and carefully (See Rule #1). If you have a handful of employees using business credit cards every other day or so, you - or someone on staff - will want to be obsessive about it. That's because if you are hacked, or if someone, say, takes a photo of your business credit card numbers while your card is somewhere in view - maybe sitting on a restaurant table waiting to be picked up - and then does a lot of online shopping, you may not know that you've had the card stolen until the criminal starts on a shopping spree.

    "Once they get the credit card numbers, it may be hard to see fraudulent charges in a business account because of the sheer amount of daily, weekly and monthly charges," Foguth says. "So it's imperative that you're staying on top of the charges and reviewing them consistently so that you know right away what is accurate or inaccurate."

    Rule #6: Get to know each and every line of your credit card billing statements. You'll be glad you did.
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