How Employee Credit Cards Work & Best Practices to Follow
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This article is part of a larger series on Best Small Business Credit Cards.
An employee credit card permits your employee to purchase goods and services on behalf of the company while giving you the ability to monitor and control spending. Many issuers offer free employee credit cards, allowing you to earn rewards on their spending without paying an additional fee per card.
Using employee credit cards will save you the time and hassle of reimbursing employees who pay for business expenses with their own money. Plus, you can more quickly hit spending requirements to earn introductory rewards. A card like the Chase Ink Business Cash® offers $750 cash back when you spend $7,500 within the first three months. Employee credit cards are free.
How Employee Credit Cards Work
An employee business credit card is an authorized user credit card that you can give to employees for making purchases on behalf of the company. Employee credit cards are assigned to specific employees and are tied to the primary card on the account. Employee credit cards are available on your small business credit card, corporate credit card, or prepaid business card account. You can request additional employee cards from your issuer.
Employee business credit cards work just like the primary card on your business’s account. An employee can use the card to make purchases online or in a store. Employee credit cards include the same annual percentage rate (APR), earn the same rewards, and come with the same benefits as the primary card. Most cards will allow you to set spending controls that help protect you from employee abuse.
Depending on the type of employee card you choose, either you or the employee will be responsible for paying the monthly bill. If you pay the bill, all of your employees’ charges will appear on your statement. In either case, you can track spending throughout the month via your issuer’s online banking portal.
Types of Employee Credit Cards
The type of employee credit card that’s right for you and your business depends on the number of cards you need, your business’s annual revenue, and whether you want to avoid personal liability. Corporate credit cards are generally reserved for larger businesses while firms of any size can take advantage of small business credit cards and prepaid business cards.
Most Common Types of Employee Credit Cards
Type of Employee Credit Cards | Best For |
|---|---|
Businesses with one or more employees | |
Businesses with $4 million+ in revenue and $250,000+ in annual card expenses | |
Owners who can’t qualify for or don’t want a typical card |
1. Small Business Credit Cards
A small business credit card is an authorized user credit card owners give to employees to pay for company expenses, such as office supplies. It’s best for businesses with one or more employees. Most business credit cards charge interest on unpaid balances. Owners must provide a personal guarantee to repay, similar to a personal card. If you’re looking to streamline your business-to-business purchasing process, consider a purchasing card to avoid interest.
Small Business Employee Credit Card Costs
- APR: Issuers set their own interest rates based on a spread above the prime rate and rates vary by issuer; however, if you carry a balance, you’ll typically pay between 13% and 25% APR
- Annual fee: Ranges from $0 to more than $100 per card; many issuers—even those that charge an annual fee—waive annual fees on employee credit cards
Neither corporate credit cards nor prepaid business cards charge interest. Corporate credit cards are charge cards and must be paid off each month. Prepaid cards are funded by the owner, meaning there is no loan, and no interest assessed.
Small Business Employee Credit Card Rewards
- Cash back, points, or miles rewards: You may earn up to 5% cash back or five points/miles on business-related expenses. Rates for ongoing rewards vary by the card issuer. You may earn either a fixed rate on all spending or higher returns on specific spending categories
- Enterprise perks: Free benefits may include access to airport lounges, expedited airport screening, and car rental insurance
Small business credit cards for employees earn the same rewards and come with the same benefits as the master card on the account. If you chose a business credit card because it offers rewards tailored to your business’s spending, arming your employees with the same card could prove lucrative. Rewards can be redeemed by the master account holder only. While corporate credit cards come with similar rewards programs and enterprise perks, prepaid business cards typically don’t offer rewards or perks.
Small Business Employee Credit Card Spending Controls
Small business credit cards offer the ability to both monitor and restrict employee spending. Owners can set individual card limits based on the amount spent, spending categories, or time of day. They also can track spending online and receive an itemized spending breakdown per employee, although the available reporting tools may not be as rigorous as corporate credit cards offer. The master account holder may also receive alerts when employees use the card.
Small Business Employee Credit Card Liability
Owners must make a personal guarantee to pay the amount owed in the event the business or cardholder fails to do so. A personal guarantee protects the card issuer but places the additional risk on the owner. If an employee makes unauthorized charges on an authorized user credit card, the owner is still responsible for repaying the debt.
Corporate credit cards and prepaid business cards do not require a personal guarantee. Under corporate cards, either the company itself or the company and employee cardholders are jointly responsible for paying card balances. With prepaid business cards, the card is funded by the owner, so there’s no balance to repay.
Maximum Allowable Number of Employee Credit Cards
Most small business credit card issuers set no maximum limits on the number of employee credit cards per account. For example, American Express limits employee credit cards to 99 on some of its cards. On cards with no restrictions, issuers recommend you consider a corporate credit card if you need 75 to 100 employee credit cards or more because those cards offer more robust tracking tools.
Where to Get a Small Business Employee Credit Card
Most issuers allow owners to get a business credit card online. You may request employee credit cards at application or after your account has been opened. Small business credit cards are issued based on the owner’s personal credit score.
When you apply for a card like Chase Ink Business Cash®, you can ask for as many employee credit cards as you need at no extra cost. The issuer recommends a corporate credit card if you need more than 100 cards.
2. Corporate Cards
A corporate card allows businesses to issue employee cards to authorized users to make business-related purchases. They’re best for businesses with at least $4 million in annual revenue and $250,000 in credit card expenses. This type of card carries no APR because it’s due in full monthly and offers the most robust controls, account management, and reporting features of all employee card types. Plus, the owners don’t need to provide a personal guarantee.
Corporate Employee Credit Card Costs
- APR: None because the balance must be repaid monthly
- Annual fee: Ranges from $0 to more than $100 per card
Small business credit cards charge interest on unpaid balances—unless it’s a charge card, which must be repaid in full monthly—while prepaid business cards charge no interest. A prepaid card is funded by the owner, which means there is no balance to repay.
Corporate Employee Credit Card Potential Rewards
- Cash back rewards: You may earn up to 5% cash back on business-related expenses; rates for ongoing rewards vary by card issuer; you may earn higher returns on specific spending categories, like office supplies or airfare
- Enterprise perks: Free benefits may include access to airport lounges and travel insurance
Corporate cards for employees earn the same rewards and come with the same benefits as the master card on the account. Rewards may accumulate in the master account, or the employer may allow employees to keep their rewards. Small business credit cards offer similar rewards and perks as corporate cards. Prepaid business cards generally don’t offer rewards or extra benefits.
Corporate Employee Credit Card Spending Controls
- Centralized monitoring: Track corporate credit card spending in real-time with online dashboards that allow you to monitor individual cardholder use; this powerful analytics solution also allows companies to track the spending the company does most frequently, which can help with budgeting expenses
- Spending controls: Set up individual limits, locations and times of day when a corporate employee credit card may be used; you may be able to freeze individual cards and receive alerts on employee spending via your mobile devices
Corporate cards come with robust monitoring and spending controls that allow owners to restrict how much money individual employees can spend. You may be able to control total spending or limit employees’ spending based on the category. Owners, for example, may want to give employees the ability to purchase gas, but not hotel stays. Both business credit cards and prepaid business cards offer monitoring and spending controls, although management tools may not be as robust.
Corporate Employee Credit Card Liability
- Full corporate liability: The business, not the owner, is responsible for all card charges
- Joint corporate and employee liability: The company and the cardholder share liability; employee cardholders typically pay monthly card charges based on the firm’s credit card policy and are later reimbursed
The primary benefit of a corporate credit card is that company owners typically do not have to provide a personal guarantee to repay, and they have no individual liability. Instead, issuers place liability on the business itself or between the business and the cardholder. Business credit card issuers require the owner to provide a personal guarantee to repay. There’s no personal guarantee with prepaid cards as the owner funds the cards, and there’s no loan.
Maximum Allowable Number of Corporate Credit Cards
Issuers don’t set limits on the maximum number of card users you can have. However, you must meet certain minimum requirements. In addition to revenue and spending restrictions, issuers typically require a business to have at least 15 corporate employee credit card users to be eligible for a corporate card program.
Where to Get Corporate Employee Credit Cards
Unlike with other forms of employee credit cards, business owners cannot apply online for a corporate credit card. Owners or managers with spending authority must first fill out an online form or call a toll-free number to speak with a banking representative. Corporate credit cards are issued based on your company’s revenue, card spending, credit rating, and size.
The One Card from Capital One®, for example, is a corporate credit card designed for companies with more than $1 million in annual card payments. You’ll pay a $19 annual fee for each authorized user credit card. There is no limit to the number of cards your company can be issued.
3. Prepaid Business Cards
Prepaid business cards limit your risk because you’re not borrowing money. They are best for owners who have plenty of cash on hand and who can’t qualify for or don’t want a small business credit card. Prepaid cards are funded with your cash. Once the money on the card has been spent, it can no longer be used unless it’s reloaded. If you have big spending needs, look for a card that offers a daily spend limit of as much as $25,000.
Prepaid Business Employee Credit Card Costs
- Setup fee: Many of the biggest issuers charge no fee to open your account, but a few issuers charge as much as $50 to get you started
- Monthly fee: Issuers charge a per card fee that often is a tiered price based on the number of cards you need; some issuers waive monthly fees if you need just a couple of cards or if your monthly spending reaches a certain threshold; expect to pay at least a couple dollars per card per month
Prepaid employee business credit cards don’t charge interest because you’re not borrowing money. Instead, you’ll pay a monthly fee based on the number of employee credit cards you need and sometimes a one-time setup fee. Neither small business credit cards nor corporate cards charge setup fees or monthly fees. Both types of cards may charge an annual fee, and small business credit cards may charge interest on balances not paid off each month.
Prepaid Business Employee Credit Card Potential Rewards
Most prepaid business cards do not offer rewards on either the master account or on employee credit cards. You may find rewards of up to 1.5% cash back if you choose a business secured credit card, which acts similarly to a prepaid business card in that a cash deposit determines your credit limit.
Both small business credit cards and corporate credit cards may offer rewards of up to 5% back in certain spending categories. You may also receive benefits like free airport lounge access on both types of cards.
Prepaid Business Employee Credit Card Spending Controls
Since your cash funds the prepaid business card account, your risk is limited to how much money is in your account at any one time. Many prepaid business cards also come with daily spending limits of between $5,000 and $25,000, which also limits your risk.
Some prepaid cards allow you to set employee credit card spending restrictions by day or merchant category. You can receive alerts for every transaction, along with daily or weekly balance updates.
Neither small business credit cards nor corporate credit cards have daily spending limits, although you’ll be subject to credit limits. Still, both types of cards offer spending restrictions and employee tracking, although corporate cards may have a more robust suite of monitoring tools.
Prepaid Business Employee Credit Card Liability
A business owner’s cash backs prepaid business cards for employees. There’s no risk to the card issuer, and the business owner won’t be required to provide a personal guarantee. Since this isn’t a credit card, there is no required credit check, either. Employees can only spend the funds available on the card, which can offer protection against employee fraud and limit the owner’s risk.
Small business credit card issuers require that owners provide a personal guarantee to repay, which places the risk on the business owner. Corporate credit cards either place the liability to repay on the company itself or require joint liability between the company and the employee cardholder.
Maximum Allowable Number of Prepaid Business Cards
The maximum number of prepaid business employee credit cards you can get varies by issuer. The maximum number generally ranges from 10 to 200 or more cards. Remember, the number of cards you have may not increase the amount of money you can spend per day from the account. So, if you need dozens of cards or more, and you have big daily expenses, your employees’ spending power may be limited.
Where to Get Prepaid Business Employee Credit Cards
Most issuers allow owners to apply online for a prepaid business card. You may request employee credit cards at application or after your account has been opened. Because you’re not requesting a revolving line of credit, there is no credit check.
Remember, your monthly cost for prepaid business employee credit cards depends on how many cards you need. With Bento for Business, your first two business prepaid cards carry no monthly fee. If you need three to 10 cards, you’ll be charged $29 per month.
Developing an Effective Employee Credit Card Policy
Before you decide which type of employee credit card policy is best for your business, you should map out—in writing—your company’s credit card policy. This document will set expectations for how employees are to use company credit cards. It also will outline rules for card repayment, expense reimbursement, liability, and credit limits. Employees who receive an employee credit card should sign this document before you allow them to use an employee credit card.
When you develop an employee credit card policy, you’ll need to determine who’s eligible, set spend limits and reporting expectations, and define consequences for breaching the policy. You may want to create a checklist yourself or download a corporate credit card policy template.
Employee Credit Cards Best Practices
Employee credit cards can save you time by eliminating the need to reimburse employee expenses. They can also save you money, especially when you set clear expectations about credit limits and the types of purchases employees are authorized to make.
Follow these six best practices when using employee credit cards:
- Make the rules clear: Your employee credit card policy should spell out clear rules about what employee credit cards should be used for, what spending limits you’ve set, and what kind of reporting you expect when they use the card.
- Limit card access: You should hand out authorized user credit cards to employees you expect will frequently need to spend money on behalf of the company. You may have employees with occasional expenses you’ll need to reimburse, but they don’t need a card.
- Set up account restrictions: Employee credit card issuers offer many tools to help you limit your risk. Take advantage of the ability to set individual card limits—either spending caps or restrictions on certain categories of spending. Your office manager may need the ability to purchase office supplies, not airfare.
- Turn on alerts: Card issuers allow you to set text alerts based on card spending. Set an alert for spending over a certain threshold or suspicious activity.
- Ask for receipts: Opening an employee credit card limits the need to offer reimbursement. However, that reimbursement process also forced employees to account for their own spending. Continue this practice by requiring receipts and matching them up to your monthly billing statement.
- Review your account: Limit the risk of employee fraud or abuse by regularly reviewing account transactions prior to receiving your monthly bill. Many employee credit card issuers allow you to track individual spending online so that you can trace expenses back to each employee.
These best practices can help you reduce your risk and prevent employee fraud. However, following these best practices won’t completely mitigate the potential for loss.
Benefits & Drawbacks of Employee Credit Cards
When used properly, employee credit cards can save your company time and money. They can even help you earn credit card rewards that you can put back into your firm or use to take a vacation. However, employee credit cards also have drawbacks, including the risk your employees will steal from you.
Benefits of Employee Credit Cards
- Earn rewards: When you reimburse your employees’ expenses, they get to keep any rewards the business purchase earned; employee credit cards allow you to keep the rewards and use them as you see fit
- Monitor and control spending: Track and limit how employees spend company money with tools that set credit limits and allow you to see business spending in real-time, which is one reason to choose a business card vs personal card
- Save time: You’ll streamline your expense process by reducing or eliminating reimbursements and paying one bill for many of your business’s purchases
Drawbacks of Employee Credit Cards
- Increasing your risk: In many cases, you personally are liable for any expenses placed on an authorized user credit card; if you have to make a personal guarantee you must place spending controls on individual cards
- Threatening your credit: If you can’t repay your company’s credit card debts, and you’ve made a personal guarantee, your business credit could be damaged; some small business credit cards even report to personal credit bureaus, meaning your personal credit also could take a hit
- Additional cardholder fees: Some credit card issuers charge additional fees for every cardholder you add to your account, which means additional expense for your company; make sure to only provide credit cards to your employees who have the frequent need to use them
Employee Credit Card Frequently Asked Questions (FAQs)
Deciding whether to issue an employee credit card may not always be an easy decision. You should know which type of employee credit card you want before submitting an application. However, there are other questions you should also ask. If we don’t answer your question in the FAQs below, leave a comment below, and we will provide an answer.
Do company cards affect credit?
It depends on the type of company card you choose. A small business credit card can affect both an owner’s personal and business credit as you must make a personal guarantee to repay. A corporate credit card may affect your employees’ credit if you establish joint liability to repay between the company and the employee.
How do company credit cards work?
Businesses may issue employee credit cards to trusted workers who have responsibility for spending company funds. The authorized user credit card carries all of the same benefits and requirements as the master account card, meaning you’ll have to pay interest on carried balances, and employee card spending may earn rewards.
Will my company credit card show up on my credit report?
Your small business credit card will appear on your business credit, your personal credit, or both. If you are late or miss a payment, that could damage your credit. For employees who have been issued a corporate credit card, if you share liability with the business, the card could appear on your report.
Bottom Line
An employee credit card could help you better control your employees’ spending on behalf of the company. Use an employee credit card to monitor and restrict employees’ use of company funds. You’ll have to be vigilant, however, as some employee credit cards expose you to personal risk in case of employee theft or if you can’t make your card payments. Be sure to choose a card that offers rewards for your company’s spending.
If your company regularly purchases office supplies, a card like the Chase Ink Business Cash® card might be a good choice. It offers 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on telecommunications services. Plus, employee credit cards are free.
