How to create an employee credit card agreement

Employee credit cards can help streamline your business spending and reduce the need for reimbursements. However, they also open the door to potential misuse if there aren’t clear rules in place. With an employee credit card agreement, you can prevent problems and keep your business both compliant and financially secure.

We walk through what a credit card agreement for employees is, why it matters, and what it should include. We also offer a customizable template and cover important legal considerations to keep in mind as you create your own policy.

What is an employee credit card agreement?

An employee credit card agreement is a formal document that outlines the guidelines for using your company’s corporate credit cards. It sets expectations around which departments or roles qualify for a card, the types of purchases employees can make, and how to report expenses.

It also covers the scope of card usage, including spending limits, approved expense categories, and documentation requirements.

This agreement is typically signed by both the employer and employee, making it a binding acknowledgment of company policy. Many businesses use it to answer common questions around acceptable use and to help prevent confusion or card misuse.

While corporate cards eliminate the need for expense reimbursements, employees are still responsible for tracking their expenses and submitting relevant documentation. A company credit card agreement ensures those responsibilities are clearly stated in writing.

Why companies have credit card agreements

Company credit card agreements make it clear which business expenses are authorized and which aren't. This helps employees know what they can purchase on their card and avoids the risk of unauthorized spending or overspending.

These agreements also protect employees by setting clear expectations and reducing the chance they’ll accidentally violate company policy. Outside of this, an employee card agreement helps protect your business from legal and financial issues.

State and federal labor laws may treat certain business expenses as reimbursable, even if an employee uses a company card for them. If you’re unsure, it’s a good idea to check with legal counsel to make sure your policy is in line with current regulations.

Without a written agreement, companies can face issues like disputes over charges or challenges holding employees accountable. A formal agreement reduces those gray areas and creates a shared understanding between employer and employee.

What is a cardholder agreement?

A cardholder agreement is a legal document issued by your credit card provider that outlines the terms and conditions of your business credit card account. It typically includes details about interest rates, billing cycles, fees, and liability.

This agreement is separate from your company’s internal employee credit card agreement. The cardholder agreement defines your relationship with the bank, while your internal policy outlines how employees are allowed to use the card within your business.

Employees should follow both the cardholder agreement and your company’s internal policy to ensure compliance with both company expectations and the card issuer’s terms.

What to include in an employee credit card agreement

A comprehensive credit card agreement for employees should set clear expectations while reducing the risk of card misuse, expense fraud, and compliance errors. Here are six key sections to include:

1. Overview

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

2. Eligibility criteria

This section should spell out specific criteria employees must meet before receiving a card. Who is eligible for an employee credit card, and what are the approval requirements? Some companies only offer this benefit to certain departments, like sales or purchasing.

Clarify the eligibility criteria so employees understand they may lose access if they change roles. If your company runs credit checks before issuing cards, that should be disclosed in this section as well.

3. Usage guidelines

This section defines which types of purchases are allowed on the card. Be as specific as possible to avoid confusion. Typical company-approved categories include travel, meals during business trips, client entertainment, office supplies, and software subscriptions.

Provide examples of prohibited purchases as well, like personal groceries or gas and vacation expenses. You should also include spending limits, required preapprovals, and documentation standards. If your company uses automated expense tracking tools, you can note how those help enforce limits and simplify oversight.

4. Employee responsibilities and reporting procedures

Make it clear that employees are responsible for keeping their company card secure, using it only for approved expenses, and reporting all charges accurately. They should also submit expense reports and receipts within the required timeframe.

If the card is lost, stolen, or possibly misused, instruct employees to report it immediately to the designated internal contact or department. Waiting too long could increase liability for both the employee and your company.

5. Consequences for misuse

What happens if the employee doesn’t follow the rules? Usage guidelines are part of the agreement, but this section should spell out the consequences for noncompliance.

Consequences may include suspension or revocation of the card, repayment of unauthorized charges, disciplinary action, or even termination of employment. In more serious cases, misuse could lead to legal consequences. Your agreement should also state that all card activity may be reviewed and must comply with applicable labor laws.

6. Card deactivation steps

Employees sometimes leave the company or change departments. Write out the steps for card deactivation in these scenarios, including timelines for returning the card and reconciling outstanding charges.

Employee credit card agreement template

Use the template below as a starting point for your company’s employee credit card agreement. It outlines the key terms and responsibilities employees should understand before using a corporate card:

Disclaimer: This template is provided as a general guide for informational purposes only. It is not legal advice, nor does it establish any form of attorney-client relationship with Ramp or the creators of this document.

We recommend that you consult with your own legal counsel to review and customize this template for your specific needs and to ensure its compliance with applicable laws and regulations prior to its use.

How employee credit cards affect personal credit

Your employees may want to know if their corporate credit cards will affect their personal credit scores. In most cases, corporate credit card holders won’t see their personal credit affected. Instead, your business takes on responsibility for the proper use of the cards.

This is because most employee cards fall under a corporate liability model, where the company, not the employee, is responsible for paying the balance. However, some businesses issue individual liability cards, which make the employee personally responsible for the charges and repayment. In those cases, the card activity may appear on their personal credit report and affect their score.

Corporate cards typically require full balance payments monthly, so there’s no possibility of late payments. As a business owner, paying off the balance is your responsibility, so your employees’ credit won’t be affected unless they’re added as primary cardholders or the card is tied to their personal credit.

Easily issue and manage employee cards with Ramp

The Ramp Business Credit Card makes it easy to issue secure employee cards while keeping full visibility and control over your company’s spending.

You can issue unlimited physical and virtual credit cards for specific teams, vendors, or expense categories. You can set rules for merchants and spending limits, and we’ll automatically flag suspicious activity for approval.

On top of that, Ramp’s Business Credit Cards automatically track every transaction, match receipts to transactions in real time, and can even generate receipts when needed. We also take care of follow-ups, like sending reminders or requesting repayments, so you don’t have to.

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