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What if an employee uses the company credit card for personal use

When you add personal expenses and business expenses to the same card, it becomes harder to understand the needs of your business and its overall financial health. “Even if you try filtering them out, your personal expenses can skew your business reports and make it very difficult to see how well (or poorly) your business is doing,” says tax advisor Michael Eckstein. Other concerns when making purchases with a business credit card are that you have less time and more difficulty disputing charges.

This means that even though a business owner has a low personal credit score, the company may still be approved for a corporate credit card as long as it meets the business credit score requirement. Typically, corporate credit cards allow you to set different limits per employee depending on their roles. If you plan to set different limits, it’s best to also include this in your policy. In addition, if you allow certain exceptions to the restrictions stated above, you need to indicate the approval process.

Our digital content is for information purposes only and does not constitute legal or tax advice. However, they do not replace binding advice and are not guaranteed to be correct or complete. Perform a thorough investigation by collecting receipts of all suspicious transactions and, if necessary, contact the vendors for their transaction records. If you’re still suspect foul play after this, contact the appropriate authorities with the evidence you’ve gathered.

When Using A Company Card Helps Your Credit Score

Company credit cards link directly to company funds or credit, and any mis-spend directly affects the company’s finances. Depending on the amount of money in question, this could have a serious impact on credit eligibility, investor confidence, even customer confidence. However, if the company pays the overall credit card bill and doesn’t require expense reporting, it’s outlined under the “Use and Financial Responsibilities” section of the policy, and this section is omitted. Using a business credit card for large purchases that can’t be fully paid for before the interest charges kick in can prove a very expensive proposition. Every business should have clear policies about spending, including which expenses can be put on cards, how much employees can spend, and how often they can use their cards. It’s important to put the policy in writing and have every employee who is issued a card read and sign it. A business credit card can be a convenient way to quickly access financing for short-term needs and increase your company’s purchasing power.

  • Consult an employment lawyer to find out the applicable wage deduction statutory requirements and how to comply with them.
  • A corporate credit card policy helps determine the eligibility, approval, and usage of corporate credit cards by employees.
  • Volopay corporate cards give your business the utmost protection against fraud and misuse.
  • Using a company credit card to charge business expenses can indirectly help your personal credit score by helping you maintain a low credit utilization rate.

But keeping receipts for so long is cumbersome and (let’s be honest) an unfair ask. Instead of just relying on an expense policy, choose Volopay corporate credit cards with built-in, customizable spending limits that come with real-time alerts and notifications for overspending. It’s important that your company credit card policy clearly defines who has the right to redeem rewards and who is responsible for lost cards and card replacement fees.

Drawbacks Of Creating A Corporate Credit Card Policy Yourself

By charging personal expenses to the card, you’re in violation of your card agreement, and the card issuer could technically close your account if it finds out. Employees will often sign a cardholder agreement before receiving a company credit or debit card.

Understanding merchant category codes is important for businesses and cardholders alike. This will help you come up with a more accurate amount the employee must pay back. If the amount is substantial, I would speak with an attorney who has experience in credit-related matters to see what you can do. Right now, Volopay virtual cards are available in Singapore, Australia, India, Singapore, Indonesia, and the Philippines. Personal expenses are any expenses that are not wholly necessary for you to complete your responsibilities as an employee.

  • This can be useful if an employee is expected to incur an occasional large expense, such as arranging a conference or taking an unusual business trip.
  • Such expense policies will also have a detailed description of what company funds can be used for, what to do in cases of misuse, and who should approve business expenses.
  • If the company has insufficient resources or the investigation is against a senior member of staff, it may be worth hiring an external investigator.

There is a very thin line between spending and splurging, and when your employees start to splurge, it could spell disaster for your business. Employees are provided with a corporate employee credit card to equip them with the ability to make work-related purchases such as buying office supplies, SaaS subscriptions, paying vendors, etc. You’ll mostly find this model in use with conventional business cards provided by big banks and credit providers.

A company’s corporate credit card policy should outline usage policies that should apply to everyone who was issued a card. In most cases, employee cardholders are extremely prohibited to use corporate credit cards for personal expenses. In an ideal world, all employees would keep a perfect record of all their purchases and maintain a scrapbook of 30 days’ worth of receipts before the credit card statements arrive.

If you mix your business and personal purchases, it could become a headache at tax time when you’re trying to figure out which expenses you can deduct. It gets even more complicated if you carried a balance on the card because you can only deduct interest paid on business-related transactions. Corporate credit cards are designed for business use, so it’s best to avoid using one for your personal expenses. If you’re the only owner of your business, using your business credit card for personal use doesn’t meet these standards. It’s not an unlikely scenario for you to accidentally use your business credit card to pay for a personal expense. For starters, make sure you flag the personal purchase so that it is not included in any of the bookkeeping for your business.