Jul
22
2011

Finance Fridays: Check Card Dangers

An article by Matt

One of the more difficult conversations that I have with churches in my role with Dime is about church check cards. Over the last several years check cards have become an increasingly lucrative revenue stream for banks (one source I read states that banks receive nearly $1.50 per check card purchase), resulting in a push to put check cards in the hands of as many people as possible. Until I began my time at Dime, I had never considered using a check card in a church context, since each of the churches I had served with used credit cards to make their purchases. The team at Dime is very clear about our feelings on check cards in the church: if you want to use check cards we can not work with you.

So, why do have our churches cut up their check cards? Two reasons: security and cash flow.

Security

What makes a check card convenient for personal use is the same thing that makes it risky for church use: it is tied directly into your bank account. If your church’s check card is stolen, lost, or if an employee is less than honest your bank account is at risk of being emptied. While banks have policies on your liability when a card is stolen or fraudulently used, it takes time to return that money… often times five days or more. This delay can cause significant cash-flow issues while you are waiting on your funds to be replaced.

Cash Flow

While security is a significant concern, the bigger issue for me is cash flow. In many ways a church operates as a small business. Cash comes in through tithes and offerings and cash goes out as payroll, facility costs, utilities, the cool new disco ball for the youth room, etc. The church’s finance person (treasurer, administrator, Dime) is in many ways spinning multiple plates making sure that paychecks clear, ministry costs are covered, and the lights stay on while making sure that there is a positive balance in the check book. This is done successfully through carefully monitoring what is coming in and planning what is going out (scheduling checks). Introducing check cards into the mix increases the complexity of this balancing act by allowing for unplanned purchases to be made at irregular intervals. Without having a disciplined purchase approval process in place these purchases run the risk of overdrawing the account and bouncing the check for the disco ball.

So, how then shall a church handle its’ purchases? Churches with an established credit history often use corporate credit cards, but the easiest way to handle this is to reimburse a staff member for their purchases upon submission of an expense report and a receipt. If your church is unwilling to go the credit card route, consider a prepaid card option like American Express PASS or The UpSide Card. Both of these cards are a great way to manage spending and track expenses, while protecting your cash flow and bank account.

How do YOU manage your church’s spending?

Pastordanny

Matt,
I like your blog but I am afraid I don’t understand either of your concerns with a debit card. A debit card isn’t any less secure than a credit card or the use of a church check. All can be used to fraud a church or be stolen. The cash flow reason is precisely the reason churches SHOULD use check cards. Americans have a bad habit of buying things they cannot pay for and expecting the money to be there in the future to pay the bill. The church is no exceptions. A check card forces a church to only spend what money they have. It also keeps people from spending money outside of authorized or budgeted needs because it shows up right away instead the end of the month. As far as access, the check card is issued to an individual they may make a purchase without a check request, but they have the same access or permission to use a check or debit (ie. pastor or treasurer). If they are a signer, they can spend money. A check card does not help that. An emergency fund or reserve fund is a much more responsible hedge against the ebb and flow of income verses expenses.

http://www.churchthought.com Matt Steen

Hey Danny, thanks for taking the time to comment! I agree with you wholeheartedly that we have an addiction to buying things that we can not afford… in fact I think that they are having conversations about this in Washington right now… again.

To speak to your security concerns, the biggest difference between a church check, a credit card, and a debit card is that the first two do not give a person immediate access to your bank account. It is conceivable that someone can obtain unauthorized access to your card, clean out your account, and run up any “overdraft protection” fees… or if your account is tied to your savings, clean that out as well. Will you get the money back? Eventually, but not after a total spending freeze, and bouncing any checks in process.

I encourage check usage as much as possible, it is far easier to track and control expenses that way, but when you can not use a check, and need a non-credit card alternative I highly recommend one of the two prepaid cards mentioned above as an alternative (UpSide and PASS) since they provide a firewall that will protect your bank account. They also will protect you from those communication errors that result in purchases being made at the wrong time.