What Is a Warm Card?

A warm card is a type of bank card that provides restricted access to a business account. It is given to an employee who needs to have limited access to a company's financial accounts. Typically, these cards allow deposits but not withdrawals. This allows the employees to make transactions while reducing the risk of theft.

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.

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 and individual bank customers, whereas warm cards are specific to business customers. Debit cards also permit transfers between accounts, but warm cards are limited to specified accounts.

Example of a Warm Card

To illustrate how warm cards work, say you are the owner of a chain of coffee shops. Altogether, your 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 your internal controls, you issue warm cards to each of five store managers. Each of these cards is connected to a company bank account set up to hold the 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 don't permit withdrawals or transfers to be made, so they effectively insure against the risk of fraud or theft.

Unlike credit cards, the warm cards don't impart any borrowing capacity to the user. Therefore, you don't need to record any liability associated with these cards, and you doesn't need to be concerned with the creditworthiness of the employees using them. Similarly, the employees know that using warm cards won't affect their personal credit scores.

The Bottom Line

A warm, or deposit-only, card is a bank card used by businesses to let employees to make deposits in the business's financial accounts. Unlike debit cards, warm cards typically only allow the employee to make deposits, while prohibiting them from making withdrawals. Warm cards are used by companies to enable their employees to make necessary transactions, while reducing or eliminating the risk of theft or fraud. They also can increase convenience for owners by allowing them to delegate cash deposits to employees without concern about fraud or theft.