In theory, company-issued credit cards are a good idea for all concerned. The company can benefit with the tracking capabilities of company credit cards, and they can establish controls to keep spending in line with their budget. Employees benefit by using their employer’s money for business expenses without having to go through the hassle of expense reimbursement.

But in practice, things can quickly go awry, and employers and employees can suddenly find themselves at odds with each other and their financial troubles. The problems usually occur where the company has no formal, written guidelines for corporate-card use, and if they do, employees fail to read or adhere to them. Then, what seemed like a good idea becomes a big mess for everyone.

Corporate card abuse has become a big issue of late, especially with some high profile cases making the news. Although it came up because of a political hack job, the revelation of Senator Marco Rubio’s misuse of a corporate card, issued by the Republican Party of Florida, spawned a number of articles about the problem.

Rubio defended his actions by declaring that he quickly repaid any personal expenses and by pleading ignorance in some instances. Of course, being a politician with ambitions for higher office, this seemingly minor issue is likely to come back to haunt him. For employees caught in similar circumstances, they may not get off so easily misusing company credit cards.

Other recent high profile cases, such as the executives from Goldman Sachs and Marriott Corp. who were fired, fined, or prosecuted for corporate card abuse, may be at the extreme end of the issue. However, employees at all levels in any company can face both personal and professional retributions. Companies are becoming less tolerant of misuse and are quicker to act with employees either through sanctions or termination.

On a personal level, employees are finding themselves personally liable for charges where a company refuses to pay the bill or is unable to due to financial troubles. The credit card companies are intent on getting paid, so they are just as willing to go after employees as they are the employers.

Company Credit Cards: The Stink Rolls Downhill

Companies can prevent many of the problems by issuing clear guidelines that specify the rules and limitations of corporate card use. It has been reported that most of the abuse occurs at the executive level, where corporate cards are often viewed as a “perk”.

So, if guidelines are established they need to be enforced at the top or else their legitimacy will be questioned by employee-cardholders in the rank-and-file. Tighter controls and frequent monitoring of employee spending is the only way a company can ensure compliance at all levels.

Employees Beware

If offered a corporate card, employees should take a moment to read the fine print of the company guidelines and ask a lot of questions. They should know the precise rules for personal use, and if none are specified, they should seek clarification anyway. Some companies allow for personal use under limited circumstances, but they have strict rules for reimbursement. Others simply don’t allow it. In many companies, non-compliance with corporate card use is cause for termination.

Of greater concern for employees is the potential personal liability they might face. That might not be a concern if you work for IBM, but the vast majority of corporate cards are issued by small businesses, many of which are just one big contract away from going under. It is not uncommon for employees to find themselves holding the bag for a company going out of business.

The first indication that you could be held liable for your corporate card debt is if you are required to provide your social security number or any personal financial information. Big red flag. The next indication is if the card shows up on your credit report. Anything that shows up on your credit report is your responsibility. And, if the arrangement with your company requires you to pay the credit charges yourself before reimbursement, you have signaled to the credit card company who to come after if the payments stop.

For employees, it is important to understand their liability and, perhaps, reconsider accepting a card if they are vulnerable. For companies, it’s important to have a formal policy in place with the mechanisms to track and enforce the proper use of corporate cards.

It can save both employers and employees a lot of trouble and expense if the right corporate credit card is chosen in the first place. The best cards come with employee control features that allow the employer to limit spending per card. They also have online account management features that provide complete transparency.

Two of the best corporate credit card programs are offered by Chase with its Ink Bold℠ with Ultimate Rewards and AT&T with its Universal Business Rewards Card. In addition to providing top tier business services that facilitate all aspects of managing employee credit cards, they both enable businesses to load up on rewards that can save them a bundle of money each month on common business expenses.

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