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Do zero liability rules apply to corporate cards?

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Your Business Credit
Your
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

Ask Elaine a question or read her prior answers in the 'Your Business Credit' archive.

Question Dear Your Business Credit,
I heard that if there were more than nine credit cards on an account, then the zero liability rules for fraud would not apply to that account. I did not know if that was factual or if it only involved a specific credit card company. We have a nonprofit that has 13 credit cards and did not know if it was in our best interest to limit that to nine cards if indeed that was an accurate statement. Could you please answer that question? Thank you so much for your help! – John

Answer Dear John,
It’s really important for nonprofits to stay on top of the credit card policies that affect their finances, given that many organizations like yours that may be on ultra-lean budgets.

For the benefit of readers who are not familiar with zero liability rules, these are policies adopted by major credit card issuers in which they have gone beyond federal legal requirements that cap individuals’ out-of-pocket expenses to $50 if a credit card is lost or stolen and used fraudulently. Under ze ro liability policies, consumers pay nothing if their cards or account information is stolen and used by a fraudster.

So are you at risk because of the number of cards on your account? The best place to find an answer to your question is on the agreement you signed with the card issuer. That is because the exceptions to zero liability vary with the card. As the FDIC notes on its website, these policies are set by the card industry.

Business credit cards, based on the sample of card agreements I inspected, do generally offer the zero liability protection. The picture is different for corporate cards, however. There is a high likelihood that if you got corporate cards for your team – regardless of how many people have cards – you are not covered.

For instance, on its website, Visa says, “Visa’s zero liability policy does not apply to Visa corporate or Visa purchasing card or account transactions, or any transactions that are not processed by Visa.” Similarly, Mastercard says, “Zero liability does not apply to the following (or certain) Mastercard payment cards: Commercial cards, unregistered prepaid cards or gift cards.” 

I could find no mention of any difference between having one corporate card, nine, 10 or more. It looks like a blanket policy, regardless of the number of cards you have.

For a more detailed look at how policies compare, see our article, “Zero-liability policies: How they work, what to do when they don’t.”

So how do you protect your organization from liability for fraudulent charges? One way is to limit the cards your organization issues to people who travel frequently or have other reasons that put them at high risk for fraud. Someone who uses a card once a year on a small purchase or two probably doesn’t need one.

Another reason to limit the number of cards is that it is possible that the primary cardholder on the account could be responsible for debts on the credit cards if the nonprofit falls behind on paying them. I discussed this possibility in more detail in a previous column, “Is the primary cardholder for nonprofit personally responsible?” If, for instance, a nonprofit suffers a funding shortfall and can’t pay the bills, that individual may not want to be on the hook.

Credit cards can be an excellent tool to keep track of expenses. Make sure no one in your organization will suffer if something goes wrong with the organization’s finances so you can all use them with peace of mind.

See related: Protecting your business from credit card fraud, 7 exceptions to zero liability policies

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Published: February 20, 2017

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Updated: 04-29-2017

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