There could be annual fees and interest charges that your employer won’t cover. In some cases, you may be able to claim tax deductions for these costs, but you’ll have to prove that you only used the card for work expenses and that you weren’t reimbursed for what you claim.
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Guide to employee credit cards
From personal assistants to CEOs, there's a wide range of people who can benefit from company credit cards.
Company credit cards help keep track of work expenses, simplify accounting, keep track of spending across different departments and ultimately streamline the accounting processes. With benefits for both individuals and businesses, this type of credit card allows employees to separate their work and personal spending.
What is a company credit card?
Company credit cards are like personal credit cards, except they’re designed with specific perks and tools to benefit businesses. With company credit cards you can easily analyze and manage your employee spending and earn rewards on business-specific purchases like office supplies and business travel.
How does an employee credit card work?
An employee credit card works the same way as a personal credit card. The main differences are who pays the bill and whether card activity is reported to the personal credit bureaus.
In most cases, the company is liable for the employee credit card debt and employee card activity doesn’t affect the employee’s personal credit score.
What types of credit cards are available for employees?
Most employee credit cards are business or corporate credit cards assigned to specific employees. We’ve outlined the key differences between these cards below:
Small business credit cards
Business credit cards are linked to a main account and can be assigned individual spending limits from a centralized system. Providing employees with business credit cards reduces the need for expense reports and reimbursement processes, as only business funds are being used.
Business credit cards can also be linked to rewards programs, giving employers and employees the opportunity to earn cash back, points or frequent flyer miles for their spending. Additionally, business credit cards can provide a range of extra benefits, including liability insurance, spending reports and compatibility with popular accounting software programs such as Quickbooks or Microsoft Excel.
Corporate credit cards
Corporate credit cards don’t require a personal guarantor. Instead, you’ll need to submit your company tax ID number and the bank will audit your company financials. Once you get the cards, you’ll start building your company credit. And you’ll only stain your company credit score without affecting your personal credit if you fail to make your payments on time.
This type of card offers higher spending controls and powerful analytics tools to help you monitor and optimize your company expenses. This is a great choice for companies with a large number of employees where tracking your business expenses can be difficult.
Personal credit cards
Employees may choose to use a personal credit card for their work expenses. The main benefit of this is that you can choose your own card. If you want to save money on spending, you may choose a low rate or a low fee option. If you want additional benefits, a rewards or frequent flyer card might suit your needs. Usually this is the best option for an employee card as you’ll get to earn rewards for business spending.
The downside of using a personal credit card for work spending is that you’ll be responsible for keeping your account in order by submitting statements or expense reports to your employer in order to claim reimbursement for spending on your card. Also, work-related purchases can put a strain on your utilization ratio, especially if a you have low credit limit.
Should I give employee cards to my employees?
If you need your employees to make business purchases often, it may be best to give them employee cards. That way you’ll simplify your bookkeeping and you can more easily get tax deductions.
But if you have fewer employees who rarely make purchases for your business, you can either wait until you really need a business credit card or consider getting a business debit card. Debit cards are a good alternative because you can’t spend more money than you have in your account, and debit cards don’t have cash withdrawal fees.
Comparing employee credit cards
Pros
- Keeps business and personal expenses separate.
- Allows businesses to track and manage work-related payments.
- Personal liability and business liability account options available.
- Reward options.
Cons
- Some company credit cards report your activity to personal credit.
- Personal liability options could leave you accountable for any issues.
- You may not be able to choose the business credit card you want.
What to consider when choosing company credit cards
When you’re looking for company credit cards, you should consider what they offer. Primary consideration factors should include:
- Reporting tools. Consider getting cards with solid reporting tools if your company has many employees. This can help you optimize your spending and negotiate better terms at merchants where you spend the most money.
- Spending controls. Opt-in for a card with spending controls for your employees. Controls usually include times and locations that the employee can use their card — or controls on specific categories, like gas, office expenses, travel and more.
- Interest rates and fees. The variable interest rates for purchases, cash advances and balance transfers, as well as the card’s annual fee — both for primary and additional cardholders — can sometimes determine whether the company cards you’re looking at are worth having.
- Rewards programs. Company cards can offer a wide range of rewards that can be earned by all cards, but the rewards are usually added to the main account.
- Complimentary extras. Some cards offer travel insurance, car rental insurance and even business liability insurance, just be sure to check whether these perks only apply to the primary account holder or if they’re available to the authorized users as well.
- Other fees. Credit cards may apply a range of other fees, including late payment and overlimit charges, foreign transaction fees, emergency card replacement fees and printed statement fees.
Always check the terms and conditions before you apply so you can learn if you’re subject to fees, eligible for rewards and promotional offers, or if there are any complimentary extras.
4 tips for using a company credit card
In case the company card you’re using doesn’t have active spending limits, be sure to:
- Stick to work spending. It’s essential that you only use your card for business expenses. Otherwise, there could be legal implications and other issues if it’s misused.
- Check what transactions are approved. Ask your boss or the appropriate work colleague before you use your card so that you know the cost will be covered.
- Track your spending. Keep an eye on your account spending so that you can make sure you have enough credit available for all your transactions. If you find you’re regularly maxing out the card, you may want to request a credit limit increase.
- Keep your receipts. In case there’s an error or if any issue arises, you’ll always have proof of your spending.
Benefits of a company credit card
Employer benefits
- Spending limits and controls.
- Track and monitor your employee spending.
- Reduce fraud and misuse.
- Earn rewards for the master account.
Employee benefits
- You don’t have to use a personal credit card.
- Won’t affect your credit score if you’re not liable for the card.
What can I not use my employee credit card for?
You shouldn’t use your employee credit card for personal purchases. Aside from legal issues, it’s likely that you’ll be liable for those purchases and you may lose your job.
Compare business credit cards
Bottom line
Company credit cards can be a great choice for your business if you have a number of employees and you want to simplify their spending process. With a company card, you’ll get better spending controls and limits, and you’ll be able to monitor and track employee card activity with ease.
If you’re not certain which credit card can serve your business best, check out our business credit card guide and compare your options.
Frequently asked questions
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