What Is a Warm Card?

A warm card is a type of bank card that provides restricted access to a business account. Typically, these cards allow deposits but not withdrawals.

Key Takeaways

  • A warm card is a bank card used by businesses to facilitate deposits by employees.
  • They typically only permit deposits, while prohibiting withdrawals.
  • Warm cards are used to protect against the risk of theft or fraud.

Understanding Warm Cards

Warm cards are used by businesses that want to minimize their risk of fraud or theft. Employees whose job descriptions require them to make bank deposits can be given warm cards that allow them only the access needed to complete their duties. By blocking withdrawals, warm cards eliminate the risk of theft by employees.

Today, businesses also have access to other security measures, such as the use of multi-factor authentication or complex passwords. As the scale of online fraud continues to grow, businesses are increasingly turning to a mixed approach in which they combine these online methods with physical measures such as the use of warm cards.

Warm cards are distinct from debit cards in that the latter generally allow for both deposits and withdrawals. Another difference between them is that debit cards are used by both business customers and individuals, whereas warm cards are specific to business customers. Debit cards also permit transfers between accounts, whereas warm cards are limited to specified accounts.

Real World Example of a Warm Card

Michael is the owner of a chain of coffee shops. Altogether, his company has five locations and 15 employees. Each location has a store manager whose responsibilities include depositing the cash received from customers at the end of each week.

As part of his internal controls, Michael issues warm cards to each of his five store managers. Each of these cards is connected to a company bank account set out to hold cash from customers. When the store managers present their cards, the bank tellers know that they are authorized to deposit cash into the company account. At the same time, the warm cards do not permit withdrawals or transfers to be made, so they effectively insure against the risk of fraud or theft.

Unlike credit cards, the warm cards do not impart any borrowing capacity on the user. Therefore, Michael does not need to record any liability associated with these cards, and he does not need to be concerned with the credit-worthiness of the employees using them. Similarly, the employees know that using the warm cards will have no effect on their personal credit scores.