Large businesses have a well-established system to make purchases and manage their finances. However, small businesses generally find it difficult to operate on a cash-only basis that they receive as a result of day to day activities. Using debit cards has lots of benefits for individuals and businesses. However, they also have limitations and drawbacks.
Before you start using them for your business needs, you need to understand how these cards cannot be a right fit for you and in which situations it actually happens. This post will shed light on some of the cons of using debit cards by a business
Using debit card has no impact on your credit score:
Having a higher credit score is very beneficial for those who may want to apply for a loan in future. Every person who has to deal with the cash flow on a daily basis wants to see a boost in the credit score which is, unfortunately not possible with the use of a debit card.
When you carry out a transaction through your debit card, you use only that money which you already have in your account. So, no matter how effectively you manage everything, you will have to fall back on some other methods to see an increase in the credit score. Learn about direct debit dishonour at Payleadr.
You can spend money up to a certain limit:
Your bank card does not allow you to carry out a large transaction. You will have to use a checkbook if you want to extract money from your account. Unlike credit cards, the bank card also does not allow the account holder to conduct a transaction if his account balance is low. So, you will have to limit your business spendings if you are depending on your debit card.
Chances of getting scammed are higher:
The customers of the debit card from a particular bank are always vulnerables to frauds and scams no matter how hard they try to avoid it. Even banks and other financial institutes know this and take all the necessary measures to protect their consumers from frauds. Still, there are chances of fraud. In simple words, a debit card does not provide as much protection as a credit card.
The fee is high:
If the ATM you are using for carrying out the transaction is not affiliated with the bank that has issued the ATM card, you will have to incur additional charges. Additionally, using the ATM card of other banks is not safe at all since the data from one card can be transferred to dummy cards that can act like an origina card and take the money out.
Conclusion:
Using an ATM card can have many pros and cons. If you are thinking whether you should use a debit card or a credit card, consider your business needs, preferences and then make a decision regarding using either of them. It is good to have both cards at hand.