5 business expense card options for employers

Owners should consider conveniences, rewards, frequency of employee purchases

Allie Johnson
Personal Finance Writer
Award-winning writer covering consumer and small-business credit cards.

How to extend credit to employees

It’s a dilemma most small-business owners face: deciding how to give your employees credit cards so they can pick up office supplies, embark on business trips and wine and dine prospective clients.

Business owners tackle this question in a variety of ways, from asking employees to use their personal cards and get reimbursed later to ordering freshly minted company cards for everyone from the office manager to the VP of sales.

Each option has pros and cons, and a business owner should consider the business needs, the types and frequency of employee purchases and the comfort level with giving employees plastic, says Jennine Leale, CEO of HRPro Consulting Services, a New York human resources consulting firm.

“What works for some companies might not work for others,” she says. “It’s about finding your own comfort zone.”

Ways to give employees credit
Small-business owners who need to be flexible don’t have to pick just one method of dispensing credit cards to employees. You can mix and match options to give each employee only the type and amount of credit they need.

Here are five ways small-business owners can disburse and manage employee credit cards, along with the pluses and minuses of each method:

1. Reimburse workers for business charges on their personal cards.
Bosses commonly piggyback on the personal credit of their employees, which, in many cases, can be the best option for everyone. First, it can motivate employees to stay organized with purchases. “This method incentivizes employees to keep receipts and submit backup in a timely way so they can get reimbursed and pay the credit card bill,” Leale says.

Pro: Going this route also can help control costs. The owner of a tutoring startup in Houston, AJ Saleem, learned that lesson after an employee went overboard with the company card, buying loads of snacks and office décor he hadn’t requested. “Some people really like to shop, and I figured they’d be less likely to overspend on their own card,” he says.

Con: The downside is that leaning on personal cards can put a financial burden on employees who have to make costly purchases. Also, if reimbursement lags, they’ll get dinged with interest charges. And finally, this won’t be possible for an employee who doesn’t carry cards or has a very low credit limit due to bad credit. “I can see where this would be an issue, especially if purchases get into the $100 range,” Saleem says.

“Some people really like to shop, and I figured they’d be less likely to overspend on their own card.”

2. Let staff borrow your business card when needed.
If you prefer to use a company card, but still want to keep a tight handle on purchases, consider having employees use your business card. This is not illegal, even if the employee’s name isn’t printed on the card, as long as you’ve authorized them to use it, says Nessa Feddis, senior vice president at the American Bankers Association.

Pro: This strategy can offer an easy way for a small business to let employees make purchases on credit.

For example, if the receptionist needs to buy, say, a cake for an office birthday party, he can ask to borrow your card and return it immediately after the trip to the bakery. This approach also limits opportunities for fraud and keeps you directly in the loop on card purchases, says Charles Read, a CPA who works with small-business owners through his payroll company GetPayroll.

Because Read has experienced employee theft and has heard about it from many other business owners, he believes in being cautious. “If you’re going to have a company credit card, have one and keep it in your wallet,” he says.

Con: However, one big minus is that your employees would be unable to make purchases when you’re sick or on vacation, unless you leave the business credit card with a trusted office manager or other senior employee. Also, card requests could interrupt the workflow of your day.

That’s why William Gadea, founder of IdeaRocket, a company that makes animated videos for businesses, won’t go this route even though he has dealt with employee card fraud. “It’s a little more trouble than it’s worth,” he says.

3. Add employees to a small-business card account.
If you have employees who make many business purchases or travel frequently, it may make sense to get them company credit cards in their names. Adding employees to a small-business card is similar to adding authorized users to a personal card, and it eliminates the hassle of reimbursing employees for expenditures.

Pro: Personalized employee credit cards prevents employees from having to lay out personal funds for large business expenses. Most small-business cards offer tools that allow you to control and track spending, and isolate purchases by card user. And one big benefit to going this route is that your company keeps any rewards, points or cash back associated with the card.

Con: Because business cards tend to have higher credit limits than personal cards, you’re taking a big risk if you don’t limit employee spending power.

If a cardholder does go on a personal shopping spree, you will likely be on the hook for the charge unless you can convince them to pay. That’s what happened in Gadea’s case. A week after he fired an employee who had been doing the accounting, the man called and confessed to buying $400 worth of clothes at Banana Republic on the company card.

Fortunately, the employee sent a personal check a few weeks later. “I don’t think he was trying to steal, I think he was giving himself a loan,” Gadea says. However, the incident “really opened my eyes,” he says.

4. Get a corporate card.
Depending on the size and credit history of your business, a corporate card, which is different from a small-business card, might be the right choice.

Unfortunately, you typically can’t just hop online to apply for a corporate card. Corporate cards are offered by only a handful of issuers, generally to larger companies with an established credit history and relationship with the bank.

Pro: A corporate card offers a streamlined way for companies to extend credit to multiple employees and to manage their spending, and they may have more features and management tools than small-business cards.

There’s also flexibility: An employer can choose an individual liability card, in which the employee pays the bill then submits an expense report and gets reimbursed, or corporate liability, in which the company foots the bill directly.

Con: Like business owners who add employees as authorized users to their small-business cards, companies that issue corporate cards will need to monitor card use carefully to make sure employees don’t slip personal charges onto the company card.

5. Use gift cards for specific expenses.
Gift cards work well for Deborah Sweeney, CEO of MyCorporation, a small business that provides online document filing and other business services. In fact, the company orders American Express gift cards in bulk, so they get a special deal with no fees.

When members of the sales team travel, the company directly pays the big costs, such as airline, hotel and car rentals, and then hands over a gift card for meals and incidentals, Sweeney says. 

“Employees should be required to get your OK for any purchase over a certain amount, such as $100 or $500.”

Pro: An employee might get a $500 gift card for a short trip nearby or a $1,000 card for a longer trip farther away. This works well for employees who don’t travel often enough to merit their own card, and limits company risk to a specific dollar amount, Sweeney says.

Con: The only inconvenience is that the flat face value means there’s usually a random amount left on the card. If it’s more than $50 or so, Sweeney takes the card back to use for future travel. Otherwise, the company lets the employee keep it as a reward for a job well done. “They love it,” she says.

Be wise about giving employees cards.
If you do decide to extend credit to your employees, by lending them your card or giving them their own, it’s important to take steps to prevent misunderstandings, reduce the risk of fraud and protect your company. Here are some employee credit tips:

  • Create clear rules.
    It’s crucial to draw up a detailed credit card policy, says David Waring, co-founder of FitSmallBusiness.com. In writing, spell out specifics such as when a company card can be used, what can be purchased with the card and dollar limits on spending.

    You should also specify whether employees must fill out expense reports and that they must provide itemized receipts, says Tiffany Couch, a principal at forensic accounting firm Acuity Forensics and author of “The Thief in Your Company.”

    Spell out the consequences for making a personal purchase on the card. And finally, make it clear the miles and points accrued on the company card are the property of the business, Couch says.

  • Require approval for big purchases.
    Employees should be required to get your OK for any purchase over a certain amount, such as $100 or $500, Couch says. That prevents surprises when you get the bill.

  • Put controls on cards.
    If you do give an employee their own company card, make full use of available tools, such as alerts and limits, to control and monitor spending.

    In addition to setting a daily, weekly or monthly dollar limit for each employee, you can also specify the types of businesses where they can use the card, Waring says.

    For example, if you run a landscaping company and your employee regularly needs to fill the tank on the company truck, you could limit his spending to gas stations, he says.

  • Check charges regularly.
    It’s essential to review charges on a regular basis, and it’s surprising how many business owners never look, Couch says. In some cases, just a quick scan of retailer names would reveal a problem, she says.

    For example, she recently saw a case in which an employee ran up thousands of dollars in purchases in a shopping spree at Victoria’s Secret. A new administrative assistant at the company spotted the fraud when she ran out of work to do and decided to open the credit card bill.

    “This is clearly something you could catch by doing a really quick review,” Couch says.

Some small-business owners say that the trust involved in the use of credit has caused them to think even more carefully about hiring decisions. Saleem, the owner of the tutoring startup, says it’s key to put together a team of employees who respect the fact that a growing business needs to watch every expense.

“You don’t want people who think they can just go splurging on the company dime,” he says.

See related: Handling employees' personal expenses on company cards, How to handle employee abuse of business credit card, 6 questions to ask about your company credit card, Corpirate cards go virtual, offering added security


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Updated: 11-20-2017