Debit Cards

Posted on Wednesday, July 07, 2021

Does your organization use a debit card?

If it does, even if the card is not used very often and procedures are in place for its use, it presents a significant risk for funds to be stolen. A debit card is essentially the same as cash. Anyone who has access to the card has access to your bank account. Once a purchase is made funds are immediately withdrawn from the organization’s bank account. It is more difficult to recover funds used fraudulently with a debit card than with a credit card. There is also no limit on the amount of funds that can be used for a purchase.

Debit cards can also be used to withdraw funds directly from the organization’s bank account through an ATM. A nonprofit should never withdraw cash using a debit card due to the lack of documentation supporting the transaction. There is no related invoice or receipt showing the business purpose of the use of the funds. In addition, there is no control over the individual obtaining the funds.

Instead of using a debit card, a nonprofit should utilize a credit card for purchasing goods or services that cannot wait for a check to be processed.

Be sure to implement a credit policy that includes the following:

Who has access to/can use the credit card
Available credit limit
Types of purchases that can be made
Types of purchases that cannot be made
Under no circumstances should cash advances be allowed
Consequence of charging nonbusiness related expenses
Documentation required for charges
Process for submitting the documentation
Review process for the monthly credit card statements

By using a credit card instead of a debit card, your organization can greatly reduce the opportunity for its funds to be utilized in a fraudulent manner.

Contributed by: Carrie Minnich, CPA, MAcct |Director | DWD CPAs & Advisors

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.