How to Develop an Effective Employee Credit Card Policy (+ Sample Policy)

Business credit cards can give you more control over how your employees spend company money and can help you track work-related spending habits. But before you decide to allow your employees the privilege of using a business credit card, you need to develop a clear policy on how they can use it.

In this blog post, we'll provide an overview of what an employer should include in their credit card policy and some tips for making it work.

How credit cards work

Business credit cards are issued in the name of a business, not an individual, and they can be used solely for business expenses. This is important because it helps to keep personal and business finances separate. When you use a business credit card, the business will be responsible for the incurred debt.

Otherwise, these cards function the same as personal credit cards in that they offer a line of credit that can be used to make purchases or withdraw cash.

What is an employee credit card policy?

It's important to distinguish that an employee credit card policy is a set of rules that employers create to ensure employees use their company credit cards for specific services, business travel, or resources essential for work. The policy outlines who is eligible for a company credit card and what types of expenses can be charged. It should clearly state that employees can’t use the card for personal expenses.

The policy may also establish clear rules regarding the use of company funds and specify what happens if an employee fails to adhere to these rules.

Why have business credit cards?

There are a number of reasons why a business might benefit from giving its senior management team access to their own business credit cards:

• By consolidating all of their expenses onto one card, businesses can track how much they’re spending and where.
• Credit cards often come with valuable rewards and perks, for instance, cashback or points that cardholders can redeem for travel.
• Business credit cards can also help build business credit, which can contribute to securing loans and other types of financing in the future.

Why do you need an employee credit card policy?

Having a clear and concise credit card policy will help you avoid potential financial problems down the road. Below are a few reasons why an employee credit card policy is essential:

Helps prevent fraud

By specifying what purchases are allowed on business credit cards, you can avoid expenditures which are unrelated to the company's operation.

Provides clarity for employees

Your employees will know precisely what is expected of them if you have a clear credit card policy in place. This can help avoid misunderstandings and potential financial disputes.

Protects the company's finances

A well-drafted credit card policy will help safeguard your company's finances by specifying how and when company credit cards can be used.

What should be included in your employee credit card policy?

There are a few key elements to keep in mind when crafting your policy.

You'll need to decide who is eligible for an employee credit card. Typically, this will include managers and other senior employees who frequently make business purchases.

You’ll also need to set spending limits for each cardholder. This will help ensure that your employees stay within budget and don’t rack up excessive charges.

Finally, by creating a comprehensive credit card policy, you can help the business run more smoothly and prevent financial issues.

How to develop an effective employee credit card policy

Having a clear and concise policy that everyone can understand and follow is indispensable for using company funds in an approved fashion. Here are a few things to keep in mind when crafting your policy:

• Consider why you're allowing employees to use company credit cards. Is it for business expenses only? Or are some personal expenses also allowed? This will help you determine what kind of spending limits you'll need to set.
• Think about how you'll track and manage expenses. Will you require receipts for all purchases? Will employees need to submit expense reports on a regular basis? Will there be any restrictions on where cards can be used? Answering these questions will help you create a system that works well for your company and its employees.
• Make sure your policy is transparent and easy to understand. Employees should know exactly what is expected of them when using company credit cards. If there are any gray areas, be sure to address them in the policy so there’s no confusion later on.
• Establish spending alerts. By setting up spending alerts, you can be notified immediately if an employee goes over their limit or makes a suspicious purchase.
• Ensure that your policy is updated regularly. As the business grows and changes, so will your credit card needs. That’s why policy updates are recommended.

By following these tips, you can develop an effective employee credit card policy that works for everyone involved.

Sample employee credit card policy

You can find plenty of policy examples online that are ready for you to customize so they fit your needs.

Here is a sample credit card policy that you can use:

1. Purpose

The purpose of this policy is to establish guidelines for the use of employee credit cards. This policy will help prevent fraud and inappropriate use of company funds and provide clarity for employees on what is expected.

2. Eligibility

Employee credit cards are available to managers and other senior employees who frequently make business purchases. Cards will be issued in the employee’s name and will be used for business expenses only.

3. Spending limits

Each cardholder will have a spending limit based on their position and job responsibilities. Limits will be reviewed and updated on an annual basis.

4. Usage reports

Employees will be required to submit expense reports on a regular basis. Detailed reports that include receipts must be submitted on time to the company for verification, especially to avoid the company being late on payments and incurring fees as a result.

5. Usage review

It's advisable to conduct a review of credit card usage periodically. This will help ensure that employees follow the policy and that expenses are being properly tracked.

6. Policy violations

Violations of this policy will result in disciplinary action, up to and including termination of employment.

Final thoughts

An exhaustive employee credit card policy provides guidelines for employees on what is expected of them. Be sure to consider your company's needs and establish clear spending limits.

By taking the time to create a comprehensive policy, you can help the business run more smoothly and avoid financial problems down the road.