October 24, 2022

How to create an employee credit card agreement

There are several arguments in favor of empowering employees to use their personal credit card for business expenses. The company can limit liability, refer to a reimbursement policy when there’s a dispute, and require receipts to keep their expense records and tax filings in order. Small businesses have been operating this way for decades. But ultimately, the risk is higher than the reward. 


Travel expense reimbursement is often abused. Overspending is incentivized when employees use their own credit cards, especially if their cards earn rewards or miles and personal expenses often get thrown into the mix. Instead, your business can better monitor that activity with an employee credit card issued by the company.          


What is an employee credit card agreement?

An employee credit card is a card issued by the company that the employee can use for business expenses. The bill comes into the business, so it can be paid as part of general accounting activities on a regular monthly cycle. This helps to better manage cash flow. An example of this is a business travel credit card used for hotels, airfare, and meals.


The employee credit card agreement is a document that clearly outlines the obligations of the employee while using the card and the company’s role in administering it. An employee credit card eliminates the need for reimbursement, but employees are typically required to file expense reports and keep receipts. The agreement states that in writing.   


Why companies have credit card agreements and policies 

The benefits of employee credit cards are obvious, but there are also several drawbacks. Taking on additional credit lines increases the liability side of a company balance sheet. Mismanaging or defaulting on those cards will negatively affect the business credit score. Employee credit card agreements exist to prevent some of that from happening.


Your company can use a template for credit card agreements or create them from scratch based on the needs of the business. For your convenience, we’ve included a template in the next section. It’s important to spend some time crafting the agreement and maybe even have your attorney look at it. A lot can go wrong if you do this incorrectly.


Employee credit card agreement outline 

There are several sections you should include in an employee credit card agreement, including spending limits, expense report requirements, and eligibility criteria. You might also want to add in a few paragraphs about consequences for misusing the card and a cancellation procedure. We recommend including the followings points in the agreement:

1. Overview

The overview section explains what this agreement is and why it’s required. It should also have the effective date and emphasize that it’s a binding agreement once signed by both the employee and an authorized company representative.

2. Eligibility and approval process

Who is eligible for an employee credit card and what’s the criteria for their approval? Many companies only offer this service to certain departments, like sales or purchasing. Clarify that in the employee credit card agreement so they know they may no longer be eligible if they leave that department. You might also want to run a credit check to see if they’re responsible card users.

3. Usage guidelines 

This is the section where the company can set parameters for the use of the credit card for business purposes only. You can also include spending limits and authorized expense categories, though that’s tough to enforce without expense automation. Try not to generalize when creating these rules. Be direct so there’s no room for misinterpretation.    

4. Receipts and expense reports

If you think asking your employees to get receipts for business charges on their personal credit card is difficult, wait until you require it for the employee credit card you give them. Make sure you include a mandatory receipt collection and expense report clause in the agreement. Enforcing it may be difficult, but you’ll need to have it.    

5. Consequences for misuse

What happens if the employee doesn’t follow the rules of use for their employee credit card? The usage guidelines can be found in the agreement. The “consequences” section should provide details on what happens if employees don’t follow those rules. The consequences could range anywhere from losing the card to termination of employment.  

6. Cancellation policies and procedures

Employees sometimes leave the company or change departments. Write out cancellation policies and procedures for those scenarios. This is also a good place to add a “safety and security” section that explains what the employee is responsible for if they lose their card and don’t report it. That requires a card cancellation and a reissue if warranted.  


Streamline employee corporate card issuances with Ramp 

With Ramp’s charge cards and finance automation tools, issuing cards to employees is simple, easy, and most of all, secure. 


With a Ramp charge card, all expenses are tracked, reimbursements, should you need them, are automated, and you have a real-time dashboard where you can see what and where employees are spending. Best of all, the receipt collection process is straightforward. Employees can simply snap a photo of their receipts and Ramp will automatically match it to a transaction. And if you use our Gmail integration, receipts will be matched automatically with no human touch. 


Are you looking for better control over expenses and caps on employee spending? Ramp can provide those too. You can select vendors where our charge cards can be used, limit purchases that go over budget, and create an expense policy that is archived online where all employees can see it. 

Ready to learn more? Explore our interactive demo.

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What does an employee credit card agreement include?

An employee credit card agreement should include an overview, usage guidelines, details on how to keep receipts and submit expense reports, consequences of misuse, cancellation policy and procedure, and a safety and security section. Other sections can be added as needed, based on the needs of the company and what the cards will be used for.

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