Guidelines for Creating Corporate Credit Card Policies

As a business owner, you may decide to entrust some of your employees with a corporate credit card to use for business expenses. Doing so can be a great way to grow your business, as it frees up your employees to entertain clients and take care of necessary purchases without going through you every time.

The downside of issuing corporate credit cards is the potential that an employee may use it in a way you haven’t authorized. At Addition Financial, many of our business clients have asked us:

What should I include in my corporate credit card policy?

The bottom line is that you don’t want your employees to be unclear about the rules. Here are some guidelines to help you create a policy that’s fair and understandable.

Define Use of the Corporate Credit Card

One of the most important things you need to do in your corporate credit card policy is to define under what circumstances an employee may use their card. That may mean spelling out:

  • That the card may not be used for personal expenses
  • That charges over a certain amount must be approved by you
  • That nobody other than the employee may use the card for any reason
  • That the employee must keep the card information safe

In other words, you must make it clear that, since you are ultimately the one responsible for paying the credit card bill, you also get to dictate the terms of its use.

Define the Employee’s Spending Limit

In addition to spelling out the circumstances under which a corporate credit card may be used, you will also need to let your employees know what their spending limits are. You may want to set a credit limit for each card you issue. On top of that, it may be useful to set a weekly, monthly, or annual spending limit for each employee separate from the credit limit of the card.

Your corporate budget includes categories for supplies, travel, and entertainment, among other things. You may decide to assign individual limits in these categories as a way of limiting your employees’ credit card purchases. If you do so, make sure that each employee understands their spending limits.

Spell Out the Payment or Reimbursement Procedure

There are two basic types of corporate credit cards: company payment card or individual payment card. With a company payment card, the bill comes to you and you pay it directly to the credit card company. An individual payment card is paid by the employee and then submitted to you for reimbursement.

In either case, you’ll want to require employees to attach receipts to the bill so that you can review their spending and ensure they have adhered to your internal policies. You may also require an expense report where the employee lists each expense and includes an explanation of its business applications. For example, you might require them to list the attendees at a luncheon.

It’s very important to make your requirements clear. Receipts are important for your accounting and allow you to monitor spending.

The Card Issuer’s Terms

In your credit card policy, you should include a copy of the card issuer’s terms and conditions. If you have individual payment cards, each cardholder should receive the terms with their card. Whether they do or not, you should still include those terms in your policy.

Keep in mind that an employee who disregards the card issuer’s policy may impact your corporate credit. Every person who has a card must understand their obligations to the credit card company.

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The Penalties for Misuse

The final thing you should include in your policy is a clear explanation of any penalties for misuse of a corporate credit card. For example:

  • A minor breach, such as exceeding a credit limit or a one-time use of the card for a personal purchase, may result in a suspension of rights.
  • A major breach, such as repeated use for personal purchases or outright fraud, may result in termination of employment.

Be as specific as possible when explaining the consequences of misuse. You don’t want employees to be in any doubt of what will happen if they break the rules.

Signatures Required

Once your corporate credit card policy is complete, we recommend distributing hard copies of the policy and requiring an employee signature from every cardholder. The signatures will serve as proof that you distributed the policy and that the employees understand it.

You can’t force every employee to read the policy in full, but if you make them sign a document stating that they understand the policy, you’ll have covered your bases in the event you need to terminate someone for misuse.

Writing a comprehensive corporate credit card policy is a must if you want to protect your company while also giving your employees the ability to entertain clients and buy necessary items.

To learn about Addition Financial’s corporate credit cards or fill out an application, please click here now.

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