How to create an employee credit card agreement

What is an employee credit card agreement?

An 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 still required to file expense reports and keep receipts. Such an agreement states these rules in writing.

Why companies have credit card agreements

Companies put credit card agreements in place to make sure it's clear which business expenses are authorized and which are not. This helps employees know what they can purchase on their card and avoids the risk of unauthorized spending or overspending.

Additionally, these agreements often detail the procedures for reporting expenses, which is crucial for accurate financial recordkeeping and compliance with tax regulations.

What is a cardholder agreement?

Separate from a company's internal credit card policy is your business credit card's cardholder agreement.

A cardholder agreement is a legal document that outlines the terms and conditions of your credit card account. For your business credit cards, you should read these terms to understand the interest rate and how minimum balances are calculated.

What to include in a company credit card policy

A comprehensive company credit card policy should include an overview, eligibility criteria, usage guidelines, reporting procedures, consequences for misuse, and card deactivation steps.

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 criteria

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 you can define which purchases are allowed on the cards. You can also include spending limits and authorized expense categories, though that’s tough to enforce without expense automation. Be specific here so that there’s no room for misinterpretation.    

4. Reporting procedures

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. Card deactivation steps

Employees sometimes leave the company or change departments. Write out card deactivation procedures for these 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.  

How employee credit cards affect business credit

Employee credit cards are tied to a business's main credit account, directly influencing its credit score. That means that responsible usage and timely payments will positively impact the score, reflecting good financial management. However, misuse or late payments will have a damaging effect on your credit score, which could give creditors the impression that your business isn't financially secure.

If your business uses corporate cards, the impact on your credit score will differ. These cards are paid in full each month by the company, not linked to individual employee credit. That means that regardless of how employees use their cards—which typically have preset, customizable spending limits—it won't negatively impact your business's overall credit score. Another note is that unlike with regular credit cards, credit utilization ratio on corporate cards also won't affect your score.

Streamline employee corporate card issuances with Ramp 

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

With a Ramp card, all your 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. 

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