What is a business debit card?

If your business is looking for a simple, straightforward way to access funds without relying on credit, a business debit card could be the solution. Instead of opening a line of credit, a business debit card is linked directly to your business bank account, allowing you to spend only what you have. This can make it easier to stick to your budget and avoid taking on too much debt.

Learn more about business debit cards, how they work, their potential advantages and disadvantages, and how to get one for your business.

What you’ll learn:

• A debit card for business works like a personal debit card but is intended solely for company-related purchases.

• While both business debit cards and business credit cards allow you to make payments for your company, they have a few key differences—like the ability to build business credit.

• Benefits of business debit cards include better budgeting and expense management. But be aware of drawbacks, like potential fees and limited fraud protection.

A business debit card works like a personal debit card. You can use it to withdraw cash from ATMs, make point-of-sale or online purchases, and pay bills. But unlike a personal debit card, a business debit card typically pulls funds from your business checking account—or, in some cases, a business savings account.

Business debit cards can come in handy for managing day-to-day spending and purchasing items or services that keep your company running smoothly. They also help keep personal and business expenses separate—an important factor for accurate bookkeeping and filing taxes. Plus, some financial institutions allow you to issue additional debit cards to your employees, often with customizable spending limits.

Both business debit cards and business credit cards enable you to make transactions for your company, but there are a few differences to keep in mind:

• Accessing funds: Debit cards pull money directly from your business checking account, while credit cards offer a line of credit up to a set limit. So when you swipe or tap a debit card, you’re spending only the amount available in your account. A credit card enables you to make purchases and pay them off later, either in full or over time with interest, making them useful for larger purchases when you don’t have the funds on hand.

• Building business credit: A business credit card can help you build your business credit score, while a debit card does not. So although you won’t incur interest charges with a debit card, you also miss out on building business credit. Establishing good business credit can help your company qualify for better financing options and secure lower interest rates on future lines of credit.

• Earning rewards: Additionally, you can apply for a business credit card that offers benefits and rewards, like sign-up bonuses, cash back or bonus miles. A business debit card, on the other hand, typically doesn’t offer the opportunity to earn rewards.

• Protecting your account: Business credit cards typically offer more protection than debit cards, including fraud protection and purchase insurance. However, business debit cards may come with safety features like card lock and chip technology to help keep your account safe.

Here’s an overview of the key differences between business debit cards and business credit cards:

Using a business debit card can offer several advantages for your company. Here are a few key benefits to consider:

• Managing your budget: Using a business debit card can be a great way to keep your company’s budget on track. Since you’re only accessing the funds in your account, it can be easier to watch your spending and manage cash flow.

• Avoiding interest charges and debt: With a business debit card, you’re spending your own money—not borrowing it from a lender—so you won’t have to worry about racking up interest charges or accumulating debt.

• Keeping business expenses separate: Using a dedicated debit card linked to your business checking account helps separate business and personal expenses—and helps keep you compliant at tax time.

• Monitoring employee expenses: Business debit cards can help simplify and manage employee spending. By customizing spending limits, you can keep purchases under control and reduce the need for expense reports on smaller charges. 

• Using debit cards anywhere: Like credit cards, debit cards are a convenient payment method widely accepted at retail stores, restaurants, online merchants and more.

There are also a few disadvantages to keep in mind with business debit cards, including: 

• No opportunity to build credit: Using a debit card won’t help you build your business credit score. And establishing good business credit can help you qualify for future loans or lines of credit with better terms.

• Limited access to funds: You’ll be limited to the money available in your business checking account, which might prevent you from making larger purchases that could improve business operations.

• Potential fees: Make sure you understand the terms of your business bank account and debit card, including any potential fees. Some financial institutions may charge monthly service fees, overdraft fees, ATM fees and more. 

• Reduced fraud protection: Business debit cards typically offer less fraud monitoring than business credit cards. This means if your card is lost or stolen, you might temporarily lose access to your account while trying to resolve the issue.

To get a business debit card, the first step is to open a business bank account. If you choose to work with Capital One Business, you can open a business checking or savings account online, with no need to visit a branch, and easily request a Capital One business debit card to use for everyday purchases. Then you can bank from almost anywhere with the Capital One Mobile app.

Before opening a business account, read through the terms and conditions to make sure the financial institution can meet your specific needs. Consider factors like your business structure and look for features that support growth—like the ability to set employee spending limits, track expenses and avoid unnecessary fees.

A business debit card can be a simple way to manage your business expenses while staying in control of your budget. It also streamlines employee spending and helps separate business and personal expenses. Just keep in mind that it won’t help you build business credit or earn rewards like a business credit card would.

Capital One offers unique banking solutions designed to support your business’s needs. Explore business checking products from Capital One today to learn more.