Corporate Credit Cards vs. Expense Reimbursements

Contents in this Article...

Choosing between a corporate credit card and expense reimbursement is a pivotal decision for employees frequently traveling for business or making substantial company purchases.

Corporate Credit Cards Versus Expense Reimbursements

Corporate Credit Cards: The Basics

If your company boasts annual revenues in the millions, you might already possess a corporate credit card or have the opportunity to get one. Often referred to as purchasing cards, procurement cards, or P-cards, these are ideal for employees with significant travel expenses or those making purchases for the company.

Benefits of Corporate Credit Cards:

  1. Liability Shift: The company assumes responsibility for the corporate program, ensuring timely payments.
  2. Reduced Paperwork: Employees can bypass the tedious process of submitting expense reports and managing receipts.
  3. Immediate Coverage: Employees sidestep the float period, the time between charging business items to their personal card and receiving company reimbursement.

For employees in roles that require heavy travel, such as sales, or numerous business purchases, including procurement, charging these to a personal credit card can be burdensome. After all, these purchases tie up available credit on an employee’s own card or may put them dangerously close to hitting or exceeding their credit limit. For employees with lower earnings, this can be especially stressful.

For roles demanding extensive travel or frequent business purchases, using a personal credit card can be challenging. Such expenses can strain an employee’s credit limit, especially for those with modest incomes. This concern has intensified, with credit card balances reaching trillion in Q2 2023, as reported by the Federal Reserve Bank of New York. Given this, many are hesitant to charge company expenses to personal cards, even if they’ll be reimbursed later.

Corporate Card: The Ultimate Solution?

Well, that depends. Here are the key factors to consider:

  • Company Policies: Review your company’s credit card and expense report guidelines. Understand the eligibility criteria, which often hinge on the frequency of travel and the volume of company-related purchases.
  • Rewards Programs: If your personal card offers incentives like free flights or cashback, it might be beneficial to charge business expenses to it and then seek reimbursement. However, always verify your company’s stance on rewards.
  • Documentation Requirements: Corporate cards are certainly an attractive alternative to filing expense reports, which are typically done via software including Concur, Expensify, Brex or any number of similar platforms – or may even involve submitting for reimbursement manually via spreadsheet. With expense reports, typically every transaction must be supported by a receipt to attest to its legitimacy. But corporate cards carry their own requirements for support. Depending on your company’s policies, you may need to reconcile your credit card charges monthly in expense-reporting software and upload receipts. Some companies do not require receipts below a certain dollar threshold, but this varies greatly among companies in accordance with internal policies.
  • Separation of Expenses: Mixing personal and business expenses can complicate accounting. If possible, maintain distinct cards for each.
  • Reimbursement Usage: When reimbursed for out-of-pocket company expenses, promptly apply these funds to your credit card bill.

The bottom line? If you can earn rewards by placing business expenses on your own credit card and are comfortable waiting for reimbursement, that’s a wise route to take. But if money is tight and if floating company expenses on your own card would be uncomfortable, explore the possibility of obtaining a company card. As always, be sure to research your company’s specific policies to ensure you are in compliance.