A corporate credit card policy explains the usage, eligibility, and requirements of a company credit card. Corporate credit card policies are internal agreements between an employer and its employees, and it outlines the acceptable and unacceptable use of corporate credit cards. Such policies define expectations related to card repayment, expense reimbursement, liability, and credit limits.
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What a Corporate Credit Card Policy Is
A corporate credit card policy is a document that outlines the rules and regulations internal stakeholders must follow when they use a corporate credit card for business-related expenses. Corporate credit card policies set expectations in relation to eligibility, financial responsibilities, expense reporting, card spend limits, disputes, and ownership of a corporate credit card.
While you could create a corporate credit card policy from scratch, 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.
Why a Corporate Credit Card Policy Is Important
A corporate credit card policy is important for companies with a corporate credit card account. You control spending limits for each card, which allows you to protect your business while also providing employees a handy way to pay for company expenses. Such policies are important when employees will be using a form of business financing.
Four ways a corporate credit card policy is important are it:
- Documents the 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.
- Defines cardholder liability and responsibility: Depending on the card and issuer, liability is either held by the company or jointly by the company and the cardholder. This means either the company or cardholder is responsible for payments, fees, and disputes. Outlining liability issues protects the company and sets usage expectations.
- Helps businesses 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, and limits on expense categories. Such policies are important when employees are using a form of business financing.
- Creates expense reporting and reimbursement efficiencies: Expense policies need to be clearly defined, and a good corporate credit card policy can do that. It’s important to follow expense report procedures to ensure business expenses efficiencies.
Overall, corporate credit card policies help businesses establish expectations and rules for employees to follow when they use a corporate credit card. It’s easy to miss some of the details, which is why it can be helpful to start from a template, such as one provided by Rocket Lawyer. However, you can also do it on your own. Just make sure to follow our corporate credit card policy checklist so you don’t miss the details.
Checklist for Creating a Corporate Credit Card Policy
Overall, your internal business credit card policy is unique to your business. To create a corporate credit card policy, you’ll need to set a policy start date, identify your card types, determine who’s eligible, set spend limits, establish expense reporting expectations, name any consequences of a policy breach, and define who’s responsible for the policy. You can follow the checklist items below or download the checklist as a PDF.
Seven important checklist items to follow when creating a corporate credit card policy are:
1. Set Corporate Credit Card Policy Start Date
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.
2. Identify the Type of Corporate Card You Own
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.
3. Determine 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 report.
4. Set Corporate Credit Card Spending Limits
You can limit corporate credit card spending 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. If this is the case, you may want to put together a policy for how exceptions to the approved spending limits are approved.
5. Establish Expense Report Expectations With Employees
Some companies require expense reports for individual and company cards. For individual cards, a bill is sent to each cardholder. Employees typically submit an expense report with their bill attached. Once approved, the bill is paid on behalf of the employee. On company cards, one bill is sent to the company with information for all cards. The company pays the bill before any expense reports are submitted, but cardholders are still expected to submit reports.
If either of these is 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.
6. Name the Consequences for a Corporate Credit Card Policy Breach
If your employee breaches any provision of your corporate credit card policy, it’s important to have clear consequences already identified. 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.
7. Define Who’s Responsible for the Policy
Finally, 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 chief operations officer (COO) or chief financial officer (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.
After you’ve read through the company credit card policy checklist item, your next step is determining if you will create a policy on your own or use a customizable template. A company credit card policy template can save you time and ensure you cover all the bases.
Corporate Credit Card Policy Template
While you can create your own policy from scratch, using a template helps you with legal language and jargon. If want to create your own corporate credit card policy, the next section walks you through the important elements to include. However, to get started right away, Rocket Lawyer offers a policy template for $20 that 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. The template can be used for both types of corporate credit cards (company payment cards and individual payment cards).
Once you’ve reviewed the checklist, made a decision on all of those items, and determined if you’re going to use a template, your next step is making sure all the key elements are incorporated in your corporate credit card policy.
Incorporate all the Corporate Credit Card Policy Elements
Corporate credit card policies vary depending on the business. However, the seven key items you need to include in a corporate credit card policy include eligibility and approval, use and financial responsibilities, receipts and expense reports, spending limits, violations and consequences, disputes, and ownership and cancellation of credit cards.
Seven important elements that you should incorporate in your company credit card policy are:
1. Eligibility & Approval
This is normally the first section of a company 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.
2. Use & Financial Responsibilities
This section of a company credit card policy outlines the allowable expenses charged to a corporate credit card. Oftentimes 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 & Expense Reports
This section of a company 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. Expense reporting is a good idea because it helps keep cardholders accountable for their spending.
4. Credit Spending Limits
The credit spending limits section of a company 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.
If you go with a prepaid credit card, like Bento, you just preload each employee’s card with a preferred spending limit and you’re done. Try it free for 60 days with two free cards and no setup fees.
5. Credit Card Violations & Consequences
This section of a company 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 of the company credit card policy 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 & Cancellation of Credit Card
This section outlines cardholder liability. It’s important that your company 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
Corporate credit card issuers have 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 whether you use Rocket Lawyer or create your own policy, you’ll want to include these items in your final company credit card policy.
Three issuer-specific company credit card policy requirements to consider are:
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 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.
Therefore, it’s 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 and $100,000 each 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. West relies on his employees to “manage up” and make the correct purchasing decisions on behalf of the company.
In an interview with Fit Small Business, West said:
“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, Founder of Be The Machine
Specifically, Be The Machine’s credit card policy helps guide its employees by requiring:
- All employees to submit monthly expense reports for guidance and oversight
- All expenses on an expense report to include a matching receipt
- All expenses to be coded to a specific client project for operating expense tracking
- All reports to be completed within 30 days of the monthly credit card bill
- All business-related expenses to be reimbursed to the employee by the company
Corporate credit card policies don’t have to be this liberal. Still, West’s liberal spending policy that is offset with good expense reporting controls shows you just how customizable a corporate credit card policy can be. Overall, West 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.
West 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.
Benefits of a Corporate Credit Card Policy
Implementing a corporate credit card policy can mitigate any risks related to misuse or violation of a corporate credit card. A corporate credit card policy has several benefits, including documenting any rules and regulations, outlining procedures for internal stakeholders, and defining cardholder liability and responsibility.
The benefits of a corporate credit card policy are:
- Clearly documents rules and regulations: With a corporate credit card policy, your business can outline guidelines that dictate activities or transactions where the corporate card should be used. For example, you have the ability to set expectations for spending limits.
- Outlines the procedures followed by internal stakeholders: Your business’ corporate credit card policy outlines how employees and staff must go about using the corporate card. For example, some procedures include submitting monthly expense reports, and that all expenses need a matching receipt.
- Defines cardholder liability and responsibility: A corporate credit card policy should hold cardholders responsible for the security of the corporate card in addition to private information about the company. This can help outline consequences if the policy is violated.
Overall, a company credit card policy helps increase security and reduce any fraud or misuse associated with a corporate credit card. We interviewed Molly Walsh, Managing Director – Commercial Card at Chase, who added:
“From the firm’s perspective, corporate credit card policies ensure control while streamlining spend that occurs across multiple payment vehicles. An effective policy will drive efficiencies while minimizing opportunities for fraud or misuse. A corporate card policy, coupled with a corporate card program that aligns to the business’ operating structure, also delivers a warehouse of data that can be integrated across an organization to support enterprise resource planning (ERP), general ledger, accounts payable, and eProcurement.
“Data integration saves time, improves accuracy, helps identify areas of leakage, and supports program expansion. The spend data can be harnessed to deepen relationships with a specific supplier and deliver potential savings. From the employee’s perspective, a corporate card policy allows business spend to be captured on the designated company payment vehicle as opposed to flowing onto personal cards.”
With these things considered, corporate credit card policies are very customizable. As a business owner, you have the ability to set your own rules and regulations to be enforced across all corporate cards. However, there are some drawbacks you should be aware of when creating a policy on your own.
Drawbacks of Creating a Corporate Credit Card Policy Yourself
The quickest—and potentially safest—route to creating a corporate credit card policy is to use a customizable template. If you decide to create a policy on your own, know that it will require more work and you can potentially forget to cover specifics. Since it can be difficult to use the correct legal language and jargon, you may want to consult with an attorney if you build your own policy to make sure you’ve covered your bases.
The drawbacks of creating a corporate credit card policy yourself are:
- A policy requires more work compared to using a template: Without a corporate credit card policy template, you’ll have quite the work cut out for you. Creating a policy from scratch is much more time-consuming and involves a lot more work.
- You can potentially leave out important rules: Remembering all the specific rules and regulations that cardholders need to follow is challenging. If you use a template, it’s easier to make sure you’ve covered all the bases.
- Using the correct legal language is difficult: Legal language is not easy for most small business owners who are creating a policy on their own. A customizable template can help make sure you’ve used the correct language to protect your business. If you’re unsure, it’s a good idea to consult with an attorney.
Overall, creating a corporate credit card policy on your own can be time-consuming and challenging. However, there are customizable templates that you can use to simplify this process. Companies like Rocket Lawyer give business owners access to affordable corporate credit card policy and procedure templates to ensure their policies protect their businesses.
Corporate Credit Card Policy Frequently Asked Questions (FAQs)
We covered a lot of information on corporate credit card policies and how to create one for your business. Some questions are asked more often than others, and we address those here. If you have any additional questions, please visit the Fit Small Business forum or leave a comment below, and we will provide an answer.
The most frequently asked questions about company credit card policies for employees are:
Are corporate credit cards based on personal credit?
When applying for a corporate credit card, the card issuer won’t consider a business owner’s personal credit score. Additionally, the business owner won’t be held personally liable. Card issuers, however, require a “good” business credit score, rated by one of four business credit bureaus: Dun & Bradstreet (80+), Experian (76+), Equifax (90+), or FICO SBSS (140+).
Can I use a corporate card for personal use?
In most cases, a corporate credit card is meant for business expenses only. Most small business corporate credit card policies will outline usage policies related to cardholders. Typically, employee cardholders are not allowed to use corporate credit cards for personal use.
What is a corporate credit card?
Corporate credit cards are a distinct type of card, different from small business credit cards, and primarily issued to employees to pay for business-related expenses, such as travel. Corporate cards are best for businesses with $4 million in annual revenue and $250,000 in annual card expenses.
A corporate credit card policy is important for businesses with a corporate credit card account. An effective corporate credit card policy successfully outlines the eligibility, approval, and usage surrounding corporate credit cards for internal use. Such a policy can also be applicable when employees use other forms of business financing, including small business credit cards.
If you decide that a corporate credit card is not right for you, consider the Chase Ink Business Cash℠ Credit Card. You’ll earn 5% cash back and it can scale with your business by offering employee cards at no additional cost. You can control each card’s spend limits, which allows you to protect your business while providing employees a handy way to pay for company expenses.