A corporate credit card policy is a document that explains the usage, eligibility, and requirements of a company credit card. A corporate credit card policy is an internal agreement between an employer and its employees, and it outlines the acceptable and unacceptable use of corporate credit cards. Corporate credit card policies contain such things as card repayment, expense reimbursement, liability, credit limits, and more.
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In this article, we’ll discuss the following:
- Why is a Corporate Credit Card Policy Important?
- Checklist for Creating Your Own Corporate Credit Card Policy
- Corporate Credit Card Policy Template
- Elements of a Corporate Credit Card Policy
- Issuer-Specific Policy Requirements to Consider
- Example of a Real Corporate Credit Card Policy
Why is a Corporate Credit Card Policy Important?
Corporate credit card policies are good for companies that want clearly documented rules and regulations surrounding corporate credit card usage. A corporate credit card policy outlines the procedures followed by all internal stakeholders, which include both the employees as well as the employer.
Corporate credit card policies help a business in many ways. The most immediate benefit is that it defines cardholder liability and responsibility. Depending on the credit card and the issuing company, liability is either held by the company or jointly by the company and the cardholder. This means that the responsibilities for payments, fees, and disputes can fall on either the company or the cardholder. Stating all liability issues in writing protects the company and sets the right expectations for use.
Corporate credit card policies can help save money. Credit limits, for example, are outlined in the policy, along with the consequences of breaching those limits. Corporate credit card policies can contain frequency limits, monthly spend limits, limits on expense categories, and more. Such policies are important any time an employee will be using a form of business financing.
Finally, corporate credit card policies help with expense reporting and reimbursement. Expense policies need to be clearly defined, and a good corporate credit card policy can do that. For more information, check out our article on expense report procedures.
Companies such as Rocket Lawyer provide policy templates that help your business take advantage of an effective corporate credit card policy. The templates are customizable to your specific needs and take care of the legal jargon. However, it’s entirely possible to start a policy from scratch. If so, make sure your policy answers the following questions.
Checklist for Creating Your Own Corporate Credit Card Policy
Overall, your internal business credit card policy is unique to your business. To ensure you have a comprehensive corporate credit card policy, make sure it answers the following questions:
What is the Effective Date of the Policy?
All corporate credit card policies should have a start date. This ensures that everyone knows when new policies take effect and it mitigates confusion. An effective start date also grants employees leeway for credit card usage prior to the date.
What Type of Corporate Credit Card Do You Have?
Corporate credit cards come in two types: company payment cards and individual payment cards. The card type dictates cardholder liability as well as expense reimbursement, if any. Understanding the card-specific requirements helps you create a better corporate credit card policy. For more information on the different types of corporate credit cards, read our article on corporate credit cards.
Who’s Eligible for a Corporate Credit Card?
Corporate credit card policies outline the types of employees who are eligible for a corporate credit card. Some companies, for example, only issue corporate credit cards to full-time employees. Other companies limit corporate credit cards to specific departments, such as sales.
Further, you’ll want to know how to issue corporate credit cards. Your business might automatically issue cards to eligible employees. Conversely, it might require employees to submit an application for approval. Applications are for internal use only and aren’t reflected on a person’s credit score.
Do You Have Card Limits?
You can limit corporate credit cards based on a variety of factors. Frequency limits, monthly spend caps, and limits on individual expenses can all be implemented. It’s important that you get clear on any and all card limits and then detail that information in your corporate credit card policy.
You’ll want to outline monthly spending limits, expense-specific limits, as well as frequency limits, if any. Further, you can require different limits for different cardholders, and if so, you’ll want to include it in your policy. Senior leaders, for example, might have higher monthly limits than a company’s sales staff.
Are Expense Reports Required?
Some companies require employee-submitted expense reports for business expense approval. For individual payment cards, employees are held responsible for the payment of their credit card. Employees submit an itemized expense report to their employers, who reimburse their employees for approved business expenses. A business can even require expense reports for company payment cards, even though it’s not a requirement of the card issuer.
If either of these are the case, you’ll want to outline your expense report policies and procedures, such as required receipts, the approval process, and more. For information on expense reporting policies, check out our article on expense reports.
One easy way to avoid the hassle of employee-submitted expense reports, is to use prepaid business cards from a service like Bento for Business. You control spending limits and spending categories and expense reports are all stored in one convenient place for you to access in seconds. Bento even syncs with most popular bookkeeping software and offers a 60 day free trial.
What are the Consequences for a Breach in Policy?
This is an important question that sets expectations. If your employee breaches any provision of your corporate credit card policy, what’s the punishment? Smaller infractions, such as a salesperson overspending on a client, might result in the temporary suspension of his or her corporate credit card.
Larger issues, however, such as fraud can result in the termination of an employee.
Who’s in Charge of the Policy?
Finally, you’ll want to clearly define the person or employee who enforces your corporate credit card policy. This person will be responsible for such things as credit card repayment, expense report approval, as well as any disciplinary actions as a result of credit card misuse.
Typically, the COO or CFO of a company takes ownership of a corporate credit card policy. However, business owners, CEOs, and other senior leaders are also known to enforce corporate credit card policies.
Corporate Credit Card Policy Template
Rocket Lawyer offers a customizable Corporate Credit Card Policy Template for $20.00. While you can create your own policy from scratch, using the template helps you with legal language and jargon. If you’d rather create your own corporate credit card policy, the section below walks you through the important elements to include. However, the Rocket Lawyer policy template is completely customizable to your needs.
Rocket Lawyer customizes the template by asking you a series of business-related questions. You’ll need to know such things as your business location, corporate credit card account type, your plan administrator, eligible employees, as well as desired credit limits.
The corporate credit card policy template adjusts its sections and verbiage based on the answers you give. It’s possible to skip any questions you don’t know and provide the information at a later date. If this is the case, the document displays blank lines; updates are made when the outstanding information is provided. If you need help with any questions, Rocket Lawyer provides further explanations, along with suggested articles to read on the subjects.
The template can be used for both company payment cards and individual payment cards. For more information on the difference between a company payment card and an individual payment card, check out our article on corporate credit cards.
Elements of a Corporate Credit Card Policy
Corporate credit card policies vary depending on the business. The elements of an effective credit card policy are therefore flexible. The important thing regarding a corporate credit card policy is to ensure you have all of your bases covered. Make sure your policy outlines the eligibility, approval, and procedures surrounding corporate credit cards.
Rocket Lawyer’s template, for example, can have as many as 10 sections. Based on the template, important sections that you might consider adding to your policy include the following seven:
- Eligibility and approval
- Use and Financial Responsibilities
- Receipts and Expense Reports
- Credit Spending Limits
- Credit Card Violations and Consequences
- Disputed Items
- Ownership and Cancellation of Credit Card
To better understand the importance of these sections, let’s talk about each one in depth.
1. Eligibility and Approval
This is normally the first section of a corporate credit card policy. The eligibility and approval section outlines the types of employees who are eligible for a corporate credit card. For example, some companies may only allow salespeople to carry corporate credit cards.
Second, this section describes the approval process for issuing new cards. Businesses can either issue cards directly to employees or have their employees apply for a corporate credit card. Company payment cards are normally issued directly while individual payment cards require an application. For more information on the different types corporate credit cards, read our article on corporate credit cards.
2. Use and Financial Responsibilities
This section outlines the allowable expenses charged to a corporate credit card. Often times companies will denote here that the card is for “approved business expenses only.” Further, this section outlines the general procedure for credit card repayment. If a company is responsible for paying the bill, it’ll be noted here. Conversely, if employees have to submit expense reports for repayment, it’ll be noted here instead.
3. Receipts and Expense Reports
This section of a corporate credit card policy is only applicable if you require employee-submitted expense reports. If the company pays the overall credit card bill and doesn’t require expense reporting, it’s outlined in the above section of the policy and this section is omitted.
However, if a business requires expense reports, this section of the policy outlines the procedure for expense reimbursement. Such things as required receipts, the due date of expense reports, as well as the dates for approval and reimbursement are included here. For more information on expense reporting procedures, check out our article on expense report forms and policies.
4. Credit Spending Limits
The credit spending limits section of a corporate credit card policy is fairly self-explanatory. It’s here that any spending limits are clearly defined. Limits can include such items as frequency limits, monthly credit limits, limits on specific expense categories, and more. You’ll want to include limits for travel, entertainment, office equipment, and anything else here.
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5. Credit Card Violations and Consequences
This section of a corporate credit card policy defines all potential violations as well as the associated consequences. Some credit card violations include cash advances, personal expenses, erroneous expense reports, and more. You can also include violations and consequences for exceeding the spending limits outlined in the previous section.
6. Disputed Items
The disputed items section addresses the potential for erroneous charges on an employee’s corporate credit card. It’s common for businesses to hold their employees responsible for clearing up any disputed charges, returns, or adjustments on their cards.
7. Ownership and Cancellation of Credit Card
This section outlines cardholder liability. It’s important that your corporate credit card policy clearly defines who is responsible for credit card payments and lost cards. This section typically includes the company’s right to cancel or suspend corporate credit cards, as needed.
Issuer-Specific Policy Requirements to Consider
The issuer of your corporate credit card has specific terms and conditions to consider when creating your corporate credit card policy. For example, the cards provided by an issuer have specific payment terms, credit limits, and liability, all outlined by the credit card company. Regardless of if you use Rocket Lawyer or create a policy from scratch, you’ll want to include these items in your final corporate credit card policy.
1. Payment Terms
Payment terms are an important component of a corporate credit card policy. The specific terms outlined by the card issuer dictates the policies you create around card repayment. For example, many corporate credit cards allow you to carry a balance, while some corporate credit cards don’t allow for a carry-forward balance.
Further, a card’s APR and minimum payments should be taken into account when creating your corporate credit card policy. Your corporate credit card may allow you to carry a balance, for example, but if the APR is too high, you might want to create a policy requiring monthly balances to be paid in full.
Card issuers also outline responsible parties when it comes to the fees assessed on late payments. Individual payments cards, for example, hold the cardholder responsible for these fees. It’s important that you include this information in your corporate credit card policy.
2. Credit Limits
Card issuers may put a limit on your corporate credit card account. If this is the case, it’s important that you know the corporate limits placed on your account. It’s possible for these limits to be either an overall corporate credit limit or a card-specific limit.
Issuer-imposed credit limits will, of course, alter the policies you create around credit spending limits. If your overall corporate limit is $50,000 per month, for example, you’ll want to ensure that there are enough limits to stop your company from overdrawing each month.
Card issuers are specific about the liability of cardholders. If you have a company payment card, your business is responsible for all credit card payments and your employees aren’t liable. If you have an individual payment card, on the other hand, your card issuer will either hold the company liable or the company and the cardholder jointly liable.
It’s, therefore, important to understand how your card issuer assesses liability on your corporate credit cards. This will help you accurately define credit card liability – as well as the associated consequences – in your corporate credit card policy.
Example of a Real Corporate Credit Card Policy
Patrick West, founder of Be The Machine, an experiential marketing agency based in NYC and Ft. Lauderdale, reports having a corporate credit card bill between $65,000 to $100,000 a month.
Be The Machine isn’t sparse with corporate credit cards. In fact, each employee is given a corporate credit card without a monthly credit limit. Patrick relies on his employees to “manage up” and make the correct purchasing decisions on behalf of the company.
“My business requires employees to make fast decisions. It gives them the freedom and empowerment to act properly. I don’t have a fear of abuse or theft or improper spending; I do have a fear of systems, controls, and impediments.”
— Patrick West
Specifically, Be The Machine’s credit card policy helps guide its employees with the following:
- Monthly expense reports are submitted by employees for guidance and oversight
- All expenses on an expense report need a matching receipt
- All expenses are coded to a specific client project for operating expense tracking
- All reports must be completed within 30 days of the monthly credit card bill
- The company reimburses its employees for all business-related expenses
Corporate credit card policies don’t have to be this liberal. Still, Patrick’s off-hands approach to his company’s policy shows you just how customizable a corporate credit card policy can be. Overall, Patrick says that with a business credit card rather than another form of short-term financing, it’s essential that you have something in place, regardless of how strict it is.
Patrick goes on to point out that credit card companies have improved online tracking systems that help him check corporate transactions and summaries. Further, new credit card apps make the scanning and coding of receipts much easier.
A corporate credit card policy is important for any company with a corporate credit card account. An effective corporate credit card policy successfully outlines the eligibility, approval, and producers surrounding corporate credit cards for internal use. Such a policy can also be applicable when employees will be using small business credit cards, fleet cards, or small business gas cards.
If you decided that a corporate credit card is not right for you, check out the Chase Ink Business CashSM Credit Card. You get great cash back rewards and it can scale with your business. You can start out with just one or two cards and add cards as needed for no additional cost. And you control the spending limits for each card, which allows you to protect your business while also providing employees a handy way to pay for company expenses.