- Employee credit card policies may help protect companies and employees from unintended use.
- Employee credit card policies generally define who can use a business or corporate card and what they can use it for.
- Best practices for credit card policies can include an application process, strict eligibility requirements, strong security measures and spending limits.
There can be many benefits to providing your employees with business or corporate credit cards, but it may be a good idea to have solid, well thought out credit card policies in place. In this article, we’ll explore the purpose of an employee credit card policy and which provisions you may want to include to help make it useful and easy to follow.
What is an employee credit card policy?
A credit card policy governs the handling of business or corporate credit cards by employees. The guidelines typically define general use and authorized expenses among other protocols. By clearly defining how company cards can and cannot be utilized, the company may mitigate risk that can be associated with employee credit card use.
Purpose of a credit card policy
A useful credit card policy could help protect the business from unauthorized use of cards and allow employees to easily understand what is and is not an approved use. To accomplish that, a credit card policy usually includes a few key elements like general use policies, terms and conditions, eligibility, authorization procedures, violations and disciplinary actions for inappropriate use.
Employee credit card policies, though they may be recommended, are not required. It is up to a business’ discretion to implement a policy that suits the business. Credit card policies are customizable to every business and should reflect the business and its needs.
If you choose to implement a credit card policy, there are several provisions you may want to consider. Let’s look at a few.
Example provisions in an employee credit card policy
A credit card policy can be a beneficial addition to your business operations if it is easy to understand and enforce, complies with accounting needs and is flexible. As your company’s size and objectives shift, you may want your credit card policy to easily adapt to new goals and outcomes.
Many credit card policies may contain the following provisions:
- Cardholder responsibilities: What are the expectations of card handling and use by those employees who have access to a company card.
- Permissible and unauthorized use: What purchases are allowed by the employee, which purchases need special approval and which are deemed inappropriate.
- Eligibility criteria: Who within the company is eligible to obtain or use a card.
- Documentation: What documentation is required and what is the timeline for submitting documented expenses when an employee uses the card.
- Non-compliance clause: How employee violations and card misuse are handled and what are the outcomes, responsibilities and consequences for violations.
Sample protections for the use of employee credit cards
Even with the best policy, you can’t guarantee that employees will know how to or try to follow every guideline perfectly. Putting guardrails in place can help facilitate the use and management of company credit cards. Below are some best practices you may wish to consider if you choose to draft an employee credit card policy.
Application Process
Create an application process that includes a written agreement signed by the employee cardholder. This cannot only help to ensure eligibility requirements are met but gives you a documented agreement with your employees.
Security Measures
Another best practice is establishing security measures. Consider creating guidelines as to how the cards are handled by employees, stored and transferred among employees, if permissible.
Implement spending limits
Most business and company credit cards allow you to set custom spending limits for each employee, thereby enforcing spending restrictions. You can decide the amount each employee is assigned based on any factors you like, including the employee’s title, job function or department.
Create a budget
Setting a budget is another way to help manage employee credit card spending. Communicate what share of that budget each cardholder can use once the budget is set. This can help ensure the company credit limit is not maxed out by collective purchases across departments.
Common business credit card expenses
One question your employees may have is what purchases can be made with their card. Common employee expenditures for business credit cards include:
- Travel expenses: Airfare, car rental, hotels and accommodations, meals while traveling
- Equipment and office supplies: Paper, pens, printers, ink, office furniture
- Entertainment expenses: Often associated with conducting business for the purpose of sales or company outings and celebrations
- Employee education and training: Expenses incurred for employee career development
Your approved expenses will likely vary based on your industry and business objectives. The expenses listed above are typical company expenses, but it is up to each company to define what is appropriate while conducting business.
Which employees receive a business credit card
Defining who can use a credit card can be almost as important as defining its intended use. It is unlikely that every employee may need their own credit card, so the eligibility requirements you set can govern who is issued one.
To help determine eligibility, consider which employees frequently need to make purchases for the company. These can be purchases that employees make for themselves or on behalf of others as a part of their responsibilities. Setting parameters around job titles—for example executives, assistants and those who travel frequently—is one way to establish eligibility. Lastly, you might want to consider a tenure provision that states an employee, even if they meet the requirements, cannot have access to a credit card until they have been with the company a certain number of days.