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One of the most common complaints from employees is that their company does not offer them a credit card. By offering an employee-backed credit card, your company can help mitigate costly damages and provide some much needed financial relief to its workers. Whether you are already using cards or considering it for the future, here’s what to know about why they might be beneficial.,
The “employee uses company credit card for personal use” is a common issue. There are some best practices to follow when using this type of credit card.
An employee credit card allows you to monitor and manage spending while allowing your employee to buy products and services on behalf of the firm. Many companies provide free employee credit cards, enabling you to earn points on their purchases without paying a charge per card.
Employee credit cards save you time and bother when it comes to reimbursing workers who pay for company costs with their own money. Plus, you’ll be able to meet the spending criteria for the initial prizes faster. When you spend $7,500 in the first three months on a card like the Chase Ink Business Cash®, you’ll get $750 back. Employee credit cards are provided at no cost.
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Employee Credit Cards and How They Work
Employee business credit cards are authorized user credit cards that you may issue to workers to use to make purchases on the company’s behalf. Employee credit cards are linked to the account’s main card and allocated to certain workers. Employee credit cards may be obtained via a small business credit card, corporate credit card, or prepaid business card account. Your issuer may provide you with extra employee cards upon request.
Employee business credit cards function in the same way as the main card on your company’s account. The card may be used to make purchases online or at a shop by an employee. Employee credit cards have the same APR as the main card, earn the same points, and provide the same advantages. Most credit cards enable you to establish spending limits to protect yourself against employee fraud.
Depending on the sort of employee card you pick, the monthly fee will be paid by either you or the employee. If you pay the bill, your statement will show all of your workers’ costs. In any scenario, you may monitor your expenditure using your issuer’s online banking interface throughout the month.
Employee Credit Card Types
The sort of employee credit card that is best for you and your company is determined by the number of cards you need, the yearly income of your company, and if you want to avoid personal responsibility. Small business credit cards and prepaid business cards are often allocated for larger enterprises, whilst corporate credit cards are generally used for bigger businesses.
Most Common Employee Credit Card Types
1. Credit Cards for Small Businesses
A small business credit card is an authorized user credit card that business owners provide to workers to pay for business costs like office supplies. It’s most suitable for companies with one or more workers. Unpaid balances on most business credit cards are subject to interest charges. Similar to a personal card, owners must give a personal guarantee to repay. Consider using a buying card to simplify your business-to-business purchase procedure and avoid paying interest.
Employee Credit Card Fees for Small Businesses
- APR: Issuers determine their own interest rates based on a spread over the prime rate; but, if you carry a debt, you’ll normally pay between 13 percent and 25 percent APR.
- Annual fee: Can range from Annual fee: varies between Annual fee: Ranges from $0 to more than $100 per card and over $100 per card.; many issuers—even those that charge an annual fee—waive annual fees on employee credit cards to more than $100 per card; many issuers waive annual fees on employee credit cards, even if they charge one.
Interest is not charged on corporate credit cards or prepaid business cards. Corporate credit cards are charge cards, which must be paid in full every month. Prepaid cards are self-funded, which means there is no loan and no interest to pay.
Employee Credit Card Benefits for Small Businesses
- On business-related costs, you may earn up to 5% cash back or five points/miles in the form of cash back, points, or miles. The card issuer determines the rates for continued rewards. You may earn a set rate on all expenditure or greater returns on select kinds of spending.
- Access to airport lounges, quicker airport screening, and automobile rental insurance are some of the free amenities offered by Enterprise.
Employee credit cards for small businesses receive the same points and provide the same perks as the account’s master card. If you picked a corporate credit card because it gives incentives targeted to your company’s spending, providing the same card to your workers might be beneficial. Only the master account holder is eligible to claim rewards. Prepaid business cards normally do not give rewards or advantages, unlike corporate credit cards, which have comparable reward schemes and workplace incentives.
Employee Credit Card Spending Controls in Small Businesses
Employee spending may be tracked and restricted with small company credit cards. Individual card restrictions may be adjusted depending on the amount spent, the spending categories, or the time of day. They may also monitor spending online and obtain an itemized expenditure breakdown by employee, albeit the reporting capabilities provided may not be as comprehensive as those offered by corporate credit cards. When workers use the card, the master account holder may also get notifications.
Employee Credit Card Liability in Small Businesses
In the event that the company or cardholder fails to pay, the owners must issue a personal guarantee to cover the amount outstanding. A personal guarantee protects the card issuer but exposes the cardholder to further risk. The owner is still liable for repaying the bill if an employee makes unlawful transactions on an approved user credit card.
Personal guarantees are not required for corporate credit cards or prepaid business cards. The corporation, or the company and employee cardholders, are equally liable for paying card balances under corporate cards. There is no debt to repay with prepaid business cards since the card is financed by the owner.
Maximum Number of Employee Credit Cards Permitted
The majority of small company credit card providers do not place a restriction on the number of employee credit cards that may be issued per account. American Express, for example, restricts employee credit cards to 99 dollars on certain of its cards. If you require 75 to 100 staff credit cards or more, issuers suggest getting a corporate credit card with no limits since such cards have more comprehensive monitoring options.
Where Can I Get a Credit Card for My Small Business Employees?
Most issuers enable company owners to apply for a credit card online. Employee credit cards may be requested during the application process or after your account has been established. Credit cards for small businesses are granted depending on the owner’s personal credit score.
You may request as many staff credit cards as you need when applying for a card like Chase Ink Business Cash®. If you require more than 100 cards, the provider advises a corporate credit card.
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2. Business Cards
A corporate card enables organizations to provide employee cards to approved users for use in business transactions. They’re perfect for companies that generate at least $4 million in yearly sales and spend at least $250,000 on credit cards. Because it’s payable in full every month, there’s no APR on this card, and it has the most sophisticated controls, account management, and reporting tools of any employee card. Furthermore, the proprietors are not required to furnish a personal guarantee.
Costs of Corporate Credit Cards for Employees
- Because the sum must be returned monthly, there is no annual percentage rate.
- Annual fee: varies between Annual fee: Ranges from $0 to more than $100 per card and over $100 per card.
Unless it’s a charge card, which must be reimbursed in full monthly, small business credit cards charge interest on outstanding amounts, but prepaid business cards don’t. The owner of a prepaid card funds it, thus there is no debt to repay.
Potential Benefits of a Corporate Employee Credit Card
- Cash back incentives: On business-related costs, you may receive up to 5% cash back; rates for continuing rewards vary by card issuer; you can earn larger returns on certain spending categories, such as office supplies or airline.
- Access to airport lounges and travel insurance are examples of free advantages offered by businesses.
Employee corporate cards earn the same points and provide the same perks as the account’s master card. Employees may retain their rewards, or the company may allow them to accrue in the master account. Small company credit cards provide benefits and privileges that are comparable to those offered by corporate cards. Prepaid business cards don’t usually come with any bonuses or prizes.
Employee Credit Card Spending Controls in the Workplace
- centralized monitoring: Identify corporate credit card spending in real time with online dashboards that enable you to monitor individual cardholder usage; this sophisticated analytics solution also allows businesses to track the spending they conduct most often, which may assist with budgeting.
- Set specific restrictions, places, and times of day when a corporate employee credit card may be used; you may be able to freeze individual cards and get spending notifications through your mobile devices.
Corporate cards come with extensive monitoring and spending restrictions, allowing owners to set spending limits for specific workers. You may be able to restrict employee spending by category or regulate overall expenditure. For example, owners may wish to allow workers to buy gas but not hotel stays. Monitoring and spending restrictions are available on both business credit cards and prepaid business cards, however management tools may not be as extensive.
Employee Credit Card Liability in the Workplace
- Full corporate liability: All card charges are the responsibility of the company, not the owner.
- Employee cardholders typically pay monthly card charges based on the firm’s credit card policy and are later reimbursed. Joint corporate and employee liability: The company and the cardholder share liability; employee cardholders typically pay monthly card charges based on the firm’s credit card policy and are later reimbursed.
The main advantage of a corporate credit card is that business owners are usually not required to give a personal guarantee of repayment and are not personally liable. Instead, issuers hold the company or the business and the cardholder jointly liable. The owner of a business credit card must give a personal guarantee to repay the debt. Prepaid cards do not need a personal guarantee since the cards are funded by the owner, and there is no loan.
Maximum Number of Corporate Credit Cards Permitted
The maximum number of card users you may have is not specified by the issuer. You must, however, satisfy a set of minimal standards. To be qualified for a corporate card program, a company must have at least 15 corporate employee credit card users, in addition to income and expenditure limits.
Where Can I Get a Credit Card for a Company’s Employees?
Business owners, unlike other types of employee credit cards, cannot apply for a corporate credit card online. To talk with a banking professional, owners or managers with spending power must first fill out an online form or contact a toll-free number. Corporate credit cards are provided depending on the income, card expenditure, credit score, and size of your organization.
The One Card from Capital One®, for example, is a corporate credit card intended for businesses with annual card payments of more than $1 million. Each approved user credit card will cost $19 per year. There is no limit to how many cards your business may get.
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3. Business Cards With Prepaid Balances
Because you are not borrowing money, prepaid business cards reduce your risk. They’re great for company owners that have a lot of cash on hand and can’t or don’t want to get a small business credit card. Your cash is used to fund prepaid cards. The card can no longer be used after the money on it has been spent, unless it is reloaded. If you have a lot of money to spend, search for a card with a daily spending limit of up to $25,000.
Costs of a Prepaid Business Employee Credit Card
- Many of the largest issuers don’t charge anything to create an account, while a couple charge as much as $50 to get you started.
- Monthly fee: Issuers impose a per-card cost, which is usually tier-based on the number of cards you require; some issuers eliminate monthly fees if you only need a few cards or if your monthly expenditure exceeds a specific level. Expect to spend a few of dollars each month for each card.
Because you’re not borrowing money, prepaid employee business credit cards don’t charge interest. Instead, you’ll pay a monthly cost dependent on how many employee credit cards you require, plus a one-time setup fee if necessary. Setup costs and monthly fees are not charged by small business or corporate credit cards. There may be an annual fee on both kinds of cards, and small company credit cards may impose interest on amounts not paid off each month.
Potential Benefits of a Prepaid Business Employee Credit Card
Most prepaid business cards do not give incentives on either the master account or the credit cards issued to employees. If you pick a business secured credit card, which works similarly to a prepaid business card in that your credit limit is determined by a cash deposit, you might earn up to 1.5 percent cash back.
In some spending areas, both small business and corporate credit cards may give rewards of up to 5% back. On both kinds of cards, you may be eligible for advantages such as free airport lounge access.
Employee Credit Card Spending Controls on Prepaid Business Cards
Because your prepaid business card account is funded with cash, your risk is limited to the amount of money in your account at any one moment. Many prepaid business cards have daily spending restrictions of $5,000 to $25,000, which helps to reduce your risk.
Some prepaid cards enable you to establish spending limits on staff credit cards by day or merchant category. You may get transaction notifications as well as daily or weekly balance updates.
Although you will be subject to credit restrictions, neither small business credit cards nor corporate credit cards have daily spending limits. Both sorts of cards, however, include spending limits and employee tracking, while corporate cards may have a more comprehensive set of monitoring facilities.
Employee Credit Card Liability for a Prepaid Business
Prepaid business cards for workers are refunded by a company owner. The card issuer will not be exposed to any risk, and the company owner will not be obliged to offer a personal guarantee. Because this is not a credit card, no credit check is necessary. Employees may only use the cash on the card, which protects against employee fraud and reduces the risk to the business owner.
Small company credit card providers often ask owners to offer a personal guarantee of repayment, putting the firm owner at risk. Corporate credit cards may make the business liable for repayment or entail shared obligation between the firm and the customer.
Maximum Number of Prepaid Business Cards Permitted
Depending on the provider, the maximum number of prepaid company employee credit cards you may receive varies. The maximum number of cards varies from 10 and 200 or more. Keep in mind that having more cards may not improve the amount of money you may spend every day from your account. If you require dozens or more cards, and you have a lot of daily costs, your workers’ spending ability may be constrained.
Where Can I Get Prepaid Business Credit Cards for Employees?
The majority of issuers enable owners to apply for a prepaid business card online. Employee credit cards may be requested during the application process or after your account has been established. There is no credit check since you are not asking a revolving line of credit.
Remember that the monthly cost of prepaid company employee credit cards is determined by the number of cards you need. Your first two business prepaid cards with Bento for Business have no monthly price. You’ll be charged $29 each month if you require three to ten cards.
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Creating an Effective Credit Card Policy for Employees
You should lay out your company’s credit card policy in paper before deciding which form of employee credit card policy is ideal for your organization. This paper will outline how workers are expected to utilize business credit cards. It will also include the criteria for card repayment, reimbursement of expenses, responsibility, and credit limitations. Before allowing an employee to use an employee credit card, have them sign this paper.
When creating an employee credit card policy, you’ll need to figure out who’s eligible, establish spend limits and reporting requirements, and spell out the repercussions if the policy is broken. You might make your own checklist or use a template for a company credit card policy.
Best Practices for Employee Credit Cards
Employee credit cards may help you save time by removing the requirement to compensate employees for their spending. They may also help you save money, particularly if you establish clear expectations regarding credit limits and the sorts of purchases staff are allowed to make.
When utilizing employee credit cards, follow these six recommended practices:
- Clarify the rules: Your employee credit card policy should lay out clear guidelines for how to use the card, what spending limitations you’ve established, and what type of reporting you anticipate when they use it.
- Limit card access: Give authorized user credit cards to personnel who are likely to spend money on behalf of the firm on a regular basis. You may have workers that have costs that you need to pay on a regular basis, but they don’t need a card.
- Set account restrictions: Employee credit card providers provide a variety of options to assist you in limiting your risk. Make use of the ability to create particular card limitations, such as spending ceilings or restrictions on certain spending categories. Your office manager may need the capacity to buy office supplies rather than plane tickets.
- Set up text notifications based on card spending: Card issuers enable you to set up text alerts based on card spending. Set an alert for expenditure that exceeds a specific limit or for unusual behaviour.
- Request receipts: Providing an employee with a credit card reduces the requirement for reimbursement. Employees were, however, required to account for their own expenditures as a result of the reimbursement procedure. Continue to need receipts and compare them to your monthly billing statement.
- Examine your records: Regularly examining account activities prior to receiving your monthly bill may help reduce the potential of staff fraud or misuse. Many employee credit card companies enable you to monitor individual spending online, allowing you to track costs back to specific employees.
These recommended practices may assist you in lowering your risk and avoiding employee fraud. Following these recommended procedures, however, will not totally eliminate the risk of loss.
Benefits & Employee Credit Cards Have Drawbacks
Employee credit cards, when handled correctly, may save your firm time and money. They may even assist you in earning credit card rewards that you can invest in your company or use to take a trip. Employee credit cards, on the other hand, have negatives, including the possibility that your staff may steal from you.
Employee Credit Card Advantages
- Earn incentives: When you pay your workers’ spending, they get to retain any awards earned via the company purchase; employee credit cards enable you to keep the points and utilize them anyway you choose.
- Monitor and manage spending: With features that establish credit limits and enable you to observe corporate spending in real-time, you can track and regulate how workers spend company money, which is one reason to pick a business card over a personal card.
- Save time: By minimizing or eliminating reimbursements and paying a single bill for many of your company’s expenditures, you’ll be able to simplify your cost process.
Employee Credit Cards Have Drawbacks
- Increasing your risk: In many situations, you are personally accountable for any charges made on a credit card used by an authorized user; if you must issue a personal guarantee, you must set spending limits on individual cards.
- Your business credit may be harmed if you are unable to cover your company’s credit card charges and have signed a personal guarantee. Some small company credit cards report to personal credit agencies, which means your personal score may suffer as well.
- Additional cardholder costs: Some credit card issuers demand additional fees for each cardholder you add to your account, resulting in additional expenses for your business; only provide credit cards to staff who require them often.
Frequently Asked Questions about Employee Credit Cards (FAQs)
It’s not always simple to decide whether or not to provide an employee a credit card. Before submitting an application, you should determine which sort of employee credit card you want. There are, however, certain further inquiries you should make. If your question is not answered in the FAQs below, please leave a comment and we will respond.
Do business cards have an impact on credit?
It is dependent on the sort of business card you choose. Because you must offer a personal guarantee to repay a small company credit card, it might harm both your personal and business credit. If you create shared accountability for repayment between the firm and the employee, a corporate credit card may have an impact on your workers’ credit.
What is the procedure for using a business credit card?
Employee credit cards may be issued by companies to trusted employees who are in charge of spending corporate cash. The authorized user credit card has the same perks and conditions as the master account credit card, which means you’ll have to pay interest on carried balances and employee card spending might earn you rewards.
Is it true that my business credit card will appear on my credit report?
Your small company credit card will show up on either your business or personal credit reports, or both. If you are late or skip a payment, your credit may suffer. If you share responsibility with the company and have been given a corporate credit card, the card may show on your record.
Conclusion
An employee credit card might help you keep tabs on what your staff are spending on your behalf. Employees’ usage of business cash may be monitored and restricted with the use of an employee credit card. However, you’ll need to be cautious since certain employee credit cards put your personal information at danger in the event of employee theft or if you can’t make your card payments. Make sure you get a card that pays you for your business’s spending.
If your organization buys office supplies on a regular basis, a card like the Chase Ink Business Cash® card can be a suitable fit. It gives you 5% cash back on the first $25,000 you spend on office supplies and telecoms services. Employee credit cards are also free of charge.
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Company credit card policies for employees are a big part of the financial management process. The company should have a clear policy in place to help prevent fraud and identity theft. Employees should also understand how their cards work. This article provides information on best practices for employees to follow when using company credit cards. Reference: company credit card policies for employees.
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- pros and cons of corporate credit cards
- american express employee credit card
