How to Manage Employee Credit Cards

Rebecca Lake


Business credit cards provide a convenient way to pay for routine business expenses, and you could even earn money-saving rewards. You may decide to extend credit card access to your employees.

Before adding employees to business credit card accounts, make sure you establish:

-- Rules for employee card use.

-- Employee requirements for reporting expenses.

-- How rewards earned with employee cards will be shared or used.

Having a clear policy in place for managing employee credit cards can mean fewer headaches for you. Here's what you need to know to create one.

[Read: Best Business Credit Cards.]

How Do You Set Guidelines for Employee Credit Card Use?

Start with the basics to create your business credit card policy for employees. The policy should specify:

-- Eligibility for an employee card.

-- When and where employee cards can be used.

-- How card use violations will be handled.

A well-defined policy that employees must sign can help reduce confusion about the ground rules for card use.

John Waldmann, co-founder and CEO of employee scheduling software company Homebase, issued company credit cards to employees in the early days of his business. He didn't have a clear policy for card use and says that led to inconsistencies in what and how much was being charged.

Waldmann has since overhauled the policy to make sure that employees understand how company cards should be used. "The most important part of our policy focuses on what's an appropriate work expense and what isn't," he says.

Depending on what type of business you run, the charges you allow might fall into two broad categories:

-- Business travel and entertainment expenses, such as hotel stays, flights or meals.

-- Other company expenses, such as payments to vendors or purchases of supplies and equipment.

In setting your policy, you will need to decide whether and how to cap employee spending. For example, you may choose to establish spending limits per transaction, per day or per month.

Picking who gets business credit cards is just as important as choosing what those employees can charge.

Will Luckert, vice president of business analysis at Capital One Small Business Card, says, "Business owners should only issue cards to their trusted employees and should pay close attention to their purchases."

Those may be the employees who have been with you the longest or the ones who hold upper-level positions. No matter, make sure they know the consequences of card misuse.

How you deal with employee credit card infractions depends largely on how the card was misused. If an employee accidentally used the card for a small personal expense, you may just make a note in his or her human resources file. Or you could ask the employee to repay the charge.

Waldmann says, "Mistakes happen, so just double-check your credit card statement, and make sure you can account for every expense. We've never encountered an instance of intentional credit card misuse. It seems that whatever small reward that would be wouldn't be worth the risk."

Blatant abuse of a card, such as charging hundreds or thousands of dollars in personal expenses, may call for more serious measures. You may need to involve the police and your company's attorney.

Also, you may want your attorney to review your employee credit card policy before handing it out to employees. Your attorney can point out potential legal issues or loopholes and help you address those before employees sign off.


[Read: Best Rewards Credit Cards.]

How Often Should Employees Submit Expense Reports?

Getting expense reports filed in a timely fashion is one of the hardest parts of managing employee cards, says Tracy Hansen, chief marketing officer at Bento for Business, a financial solutions provider for small and midsize businesses. Even though you should be able to view employee spending on your card statements, have employees send expense reports monthly.

"Businesses that issue credit cards to their employees may have trouble getting them to turn in their expense reports on time," Hansen says. "Employees may lose credit card receipts for the purchases they've made or even submit fraudulent expense reports for personal purchases they've made."

CEOs can make expense reporting easier by being as detailed as possible with their expectations and by being consistent. That might mean:

-- Using expense-reporting software that employee card users can access.

-- Having a fixed date for sending expense reports each month.

-- Requesting specific supporting documents, such as receipts or invoices.

-- Requiring certain details for each expense, such as the date, the amount, who the expense was paid to and a description of the expense.

Check your business credit card to see if it has any built-in expense-reporting tools that can make managing employee purchases easier. American Express, for example, includes a suite of expense management tools with its small-business credit cards. The suite includes the ability to take pictures of receipts, to freeze and unfreeze employee cards, to categorize purchases, and to produce digital expense reports.

How Do Rewards Fit In?

Employee credit cards can multiply the airline miles, points or cash back businesses earn if they rely on rewards cards to reduce their expenses. Technically, those rewards belong to the primary cardholder.

You'll need to state in your policy how any rewards earned with employee cards will be divided up. In Waldmann's case, rewards earned with employee cards are used to benefit the entire company.

"We have two offices, one in San Francisco and one in Houston, and the rewards we receive from our business credit cards cover much of the travel expenses for employees that move between the two offices regularly," he says.

You could also divvy up rewards between the business and the employees who earned them. If an employee charges $5,000 to a card that offers 3% cash back, that's $150 in cash rewards earned. You could either let the employee keep the cash as a gesture of thanks or split it down the middle so your business benefits as well.

Ultimately, the business owner must choose a fair distribution for rewards. Just remember that on your business taxes, you must subtract any rewards earned from expenses claimed as deductions.


[Read: Best Secured Credit Cards.]

How Should You Choose a Business Credit Card for Employee Spending?

If you haven't chosen a card to add your employees to, you will want to heed this advice. First, ask yourself whether you're willing to pay any fees for employee cards.

Luckert says, "If you plan to issue cards to several employees, you should look for a provider that offers free employee cards."

Among business credit cards that charge an annual fee, it can be as high as $595. If an extra annual fee applies for each employee card, the fee is usually lower than the regular annual fee. The good news, U.S. News research indicates, is that more than 60% of business cards don't charge an annual fee.

Next, consider the card's annual percentage rate if you might carry a balance. The average purchase APR for business credit cards ranges from about 17% to 24%, according to U.S. News research.

Look at the rewards programs for business credit cards to ensure that they align with your company's spending habits. If employees often travel for business, choosing a business travel card that gives you miles or points for travel spending could make more sense than a card with cash back rewards in categories such as office supplies or advertising.

Also, think about how those rewards can be redeemed or divided among employees. If you'd like to be able to convert rewards into gift cards you can give to employees, make sure you have that option. And don't overlook any valuable extras that you may get with business travel cards, such as free airport lounge access or hotel stays.

Finally, take into account added features for managing employee cards. These could include the ability to freeze an employee credit card or to create spending reports for each card.

Hansen says, "Businesses should look for a total solution that not only provides the upfront feel-good perks, like rewards and low (or) no-cost fees, but also transparency into spending, controls to limit risk and/or fraud, and real-time access to transaction data."