Depending on the needs and size of your company, it often makes sense to get business credit cards for your employees. Employee credit cards permit authorized card users to purchase company-related goods and services online or offline, from office supplies to airfare, within a set budget.
Business credit cards for employees also have an upside for companies, allowing management to have oversight on work-related expenses, implement clear-cut spending limits, and accumulate credit card rewards. Employee credit cards also eliminate the need to reimburse staff members who use their personal cards for business expenses, among other benefits.
Here’s how businesses can apply for employee credit cards and the scoop on the required information, plus tips and tricks for onboarding workers to ensure that they stick to business guidelines for using the card.
How to Apply for Employee Credit Cards?
First things first: Employees are not eligible to apply for business credit or charge cards. Instead, card issuers require that company owners, partners, or directors take the reins when applying for business credit cards for employees, often referred to as supplementary cards. The business can then add authorized users by contacting the card issuer or by logging into the business card account and providing pertinent information, such as the employee’s name and contact details.
While businesses of all sizes can benefit from furnishing employees with company credit cards, some cards are intended for smaller operations, others for larger entities. Generally, there are three types of employee credit cards, each with its own application criteria:
Corporate credit cards: Typically issued to larger operations with millions of dollars of revenue, corporate credit cards allow for greater spending controls and granular analytics tools that let you monitor employee card usage and expenses by spending category, for example. No personal guarantor is required, so any activity – including delinquent payments – is linked to the company, not the person using the card. Card issuers usually require at least 15 employee cards to be issued.
- How to apply: The process of applying for employee corporate credit cards varies with the card issuer, as do card fees. Generally, the first step is to submit an inquiry by phone, online, or in person ahead of the application process. A banking representative should ask for your company’s tax ID and review your company’s financials, including annual revenue, length of time in business, business credit score, and company size. If approved, the issuer will then draw up a contract, the account will be opened, and you can authorize employee cards as necessary – usually through your online account or by calling your card issuer directly.
Small-business credit cards: Companies with at least one employee can apply for small-business credit cards. In many instances, businesses might pay one flat annual fee for the primary card – the cost of which includes each additional employee business card; other card issuers charge for each additional employee card. The number of employee cards allowed depends on the card issuer.
- How to apply: You can typically apply directly from the card issuer’s website or web/mobile account login. You can usually apply for employee cards when you apply for the primary card, so be prepared to provide all relevant information – the first and last names of each employee receiving a card, for instance. You can also apply for employee cards after you’ve been approved, either online or by calling your card issuer directly. However, it may be best to apply for employee credit cards when you apply for your business credit card as your employees can access the benefits and rewards sooner.
Prepaid business cards: Prepaid business cards are just that – the employer pays for the funds in advance, and employees can access the allocated funds. Since there’s no revolving line of credit, there’s typically no credit check and prepaid cards aren’t usually linked to a checking account – in other words, they’re more like prepaid debit cards than credit cards. Note that some prepaid card plans require a monthly fee, and some may require you to issue a minimum number of cards.
- How to apply: Business owners can apply online and request cards for employees at that stage. Or once an account is active, companies can typically obtain additional cards. Management can then establish parameters around monthly budgets and preload each card with a set amount.
Establishing Business Guidelines for Employee Credit Cards
While there are numerous benefits to employee credit cards, there can be risks, too, like workers who misuse company cards for personal transactions or overstep their privileges. Therefore, effective employee credit card management requires a clear credit card policy. It should be reviewed at least once or twice a year, and anytime your company structure changes.
To be effective, guidelines should include these best practices:
- Be transparent about the rules. Explain what specific purchases the cards can be used for and how the reporting process works.
- Keep accounts under control. Business and corporate credit card accounts let you monitor employee card usage, set spending limits for different categories or overall spending, and establish a preapproved vendor list. In some instances, it makes sense to establish companywide hotel and restaurant caps, or spell out which purchases need management approval.
- Use alerts. If available, set up text or email alerts with card issuers so you know when employees exceed spending limits or if a card has been compromised.
- Authorize fewer users. Staffers who frequently travel for work probably need an employee credit card, while those who expense paper supplies every six months may not. The fewer employee cards issued, the easier it may be to control expenses.
- Require receipts. Many employee credit cards come with tools that streamline reconciliation. Nevertheless, receipts can help keep employees aware of their spending.
- Increase spending visibility. Instead of being blindsided by unexpected employee transactions, know where you stand by tracking individual transactions online before your monthly payment is due.
The Takeaway
Streamlined accounting processes and higher credit limits are just two of the reasons it can make sense to apply for and issue business credit cards to employees. The application process can vary by card issuer as well as by the type of employee credit card. When deciding on employee credit cards for your firm, it’s essential to establish employee credit card guidelines to ensure that everyone on the team understands which purchases are permissible, how the reporting process operates, and what the individual spending limits are.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.