How to choose the right company credit card for employees

The company credit card remains a popular option for managing business expenses. It gives businesses a standard way to let employees pay for a wide range of work-related expenses: train or plane tickets, restaurant bills, hotel stays, office supplies - whatever they need to do their work.

But are credit cards really the best payment method for employees?

On the one hand, everyone knows how credit cards work. So for employees, they're quick to pick up and use.

But on the other, company cards create uncertainty, extra admin, and even fraud.

In this article, we'll weigh up the pros and cons of using company credit cards, and then provide another option that may be a better fit for your business.

Let's begin.

What is a company credit card?

Despite being used for slightly different reasons, there's nothing particularly special about the classic corporate card. It works the same as a personal credit card, but is linked to a company account.

Cardholders can use their cards online or in-store, usually with a PIN. The only practical difference is that they're usually required to provide proofs of purchase to their finance team - for tax reasons.

In fact, corporate purchasing cards were introduced simply as a workaround for businesses whose employees had a high number of expenses. Rather than filing endless expense reports and waiting to be reimbursed, some lucky employees were given their own card to pay with. It's that simple.

And as we'll explore shortly, this can be both a good and a bad thing for companies.

How does a company credit card work?

At first glance, the company credit card seems a good solution for CFOs and managers when it comes to managing business expenses.

Employees entrusted with the card know perfectly well how to use it, since it's just like their personal credit card. It has the added bonus of cash flow flexibility, since the card is not debited until 28, 30 or even 70 days after purchase.

With a company credit card, a monthly expense statement is usually sent to the cardholder, to the company CFO, and to the budget manager. The company can keep track of who's spending how much and on what, but only after the fact.

Card payments can also be limited to certain suppliers through an agreement between the bank and the company. This can be a good way to control costs.

A final advantage is that banks offer a convenient range of associated services such as travel insurance, coverage for rental vehicles, legal support, medical assistance, or even rapid refunds in the event of fraudulent transactions.

All of these features make company cards seem like a good option at first glance. However, they are not the smartest or most agile payment method currently available. Though banks offer a number of handy features, credit cards feature limited verification steps, and company spending can be a challenge to monitor.

The limits of the company card for employees

As already hinted at, there are some pretty significant downsides if corporate cards are your company's main payment method. Let's dig into each.

A short supply

The most glaring issue is that not every employee has a company card. In fact, they're usually reserved for a select few. Never mind the fact that this separates employees from one another and makes people feel untrustworthy, it creates major hassles for everyone else who needs to spend.

They either have to spend their own money and file expense reports - a solution we find completely unacceptable - or they need to track down an available card when it's time to pay. A simple payment often means lots of back-and-forth communication, which annoys both parties and slows the company down.

Lack of visibility

Finance teams need to know where company money is going. And aside from a monthly statement, they don't have an easy way to monitor credit card use.

Ideally, you'd have real-time oversight for company spending. This way, if anything unexpected, suspicious, or concerning occurs, you can react immediately. But because company cards weren't designed for businesses, you don't have that. Which means...

No real control over spending

Visibility is a crucial element of effective spend control. The finance team should also be able to increase and decrease spending limits when necessary, analyze the types of costs that arise, and create quick reports to share with senior leadership.

But controlling employee expenses doesn't have to be a battleground. It's about giving employees smart, modern payments that let them work effectively, but keep finance at the helm. (More on these shortly).

Paper work

There's so much paperwork involved in using a company card that keeping track of receipts can become a nightmare.

It's not just tedious for the employee who has to turn into an accountant each month, spare a thought for the poor souls in the finance team who have to run around collecting receipts and supporting documents. And that's assuming employees have actually managed to hold onto them!

There are tools out there to help free you from some of these hassles. But the result is still that the finance team and management end up wasting time figuring out who spent how much each month, checking that these purchases were legitimate, and following up on any missing information.

Significant fraud risks

Credit card fraud is worth billions of dollars and pounds in each of the United Kingdom United States. And the most common form is known as "card-not-present" fraud - where card details have been stolen and used nefariously.

This means that simply asking employees to take good care of the card isn't enough to keep it safe. Fraudsters don't even need the physical card to take your funds.

And as online purchases become more and more common, you end up with company card details all over the internet. Which can be a serious worry.

Old-fashioned gizmos

Another major inconvenience are the web interfaces for managing company cards. These are often clunky and hard to use, and feature limited integration with accounting software. In many cases, certain processes - for example, changing card limits - cannot be done directly online.

This means someone has to call the bank every time a spending limit needs to be raised or lowered. This is impractical and time-consuming, since banks take time to reply and tend not to process requests quickly.

And receiving credit card statements in pdf format at the end of the month doesn't the finance team export payments into their accounting software. This can make it hard to analyse the figures, and limits the oversight of company expenditure.

A much better option: employee expense cards

The company card does have certain advantages. But it's not suitable for young, dynamic companies or rapidly growing SMEs. They're looking for tools that combine flexibility, security and automation.

Tools such as prepaid expense cards.

These can be issued directly to the employees or teams that need them. But unlike a credit card, which is essentially managed by your bank, you control the funds available to the user. This allows for clear oversight at any point of the month.

If you have traveling salespeople, you can issue them a fixed per diem with the available spend refreshing each day. If you have a marketing team with an advertising budget, you can set that limit weekly or monthly, depending on what works best for you.

Prepaid cards also feature instant approvals, meaning employees can request same-time authorization for particular expenses. This provides flexibility and convenience for employees, while also maintaining security for management.

And some payments can even be pre-approved. If you know that an employee has a regular expense to fulfill, you can approve that in advance while restricting all other payments.

And if your teams need to extend their limit, they just ask ask for authorization from their manager or finance team. This means no more time spent calling the bank.

Most important: every employee can have one. They're not risky like corporate cards, because they aren't linked to a bank account. Instead, they draw from funds that the company tops up. They can't spend over-budget, and finance teams always know exactly what's been spent in real time.

And don't forget virtual cards

Taking prepaid cards even further, virtual credit cards let employees make online payments without needing a physical card at all.

Employees generate unique numbers for specific online purchases, meaning there's no need to pass the plastic all over the office.

With virtual credit cards, recurring online payments can be automated, meaning one less thing to think about each month. What's more, receipts are automatically captured and reconciled against expense categories, providing for quick and easy oversight.

And there's a security benefit too. Since individual virtual cards are created for each payment, card details are non-transferable. This helps keep your details secure, and essentially reduces the possibility of credit card fraud to zero.

And if one of your virtual cards gets compromised (or maxes out), only one payment is interrupted. If you have dozens of monthly subscription payments, this means you can avoid the nightmare that would normally come with a cancelled credit card.

Free yourself from the company plastic

Let's face it: the company credit card is still a popular option for startups and growing businesses. But when it comes to managing office and employee expenses with convenience and security, there are far better options available.

One of these is Spendesk, which combines flexible, secure payment methods and integrated expense management software into one clever package.

It's free to get started, so why not take a look?