What is a ghost card and how do they work?

Imagine your employees come to you looking for approval to purchase some job-essential items. Instead of giving them a set budget or a prepaid debit card, you simply assign each of them a virtual card number with no spending limit. What do you think happens next?

It’s a recipe for financial disaster. This is called the “ghost card effect.”

This dilemma is more serious than a simple debate over secured vs. unsecured business credit cards. Ghost credit cards are generally connected to unsecured business credit cards, opening the company up to expenses they have no control over.

In this article, we'll explain what ghost cards are, their downsides, and why Ramp is a worthwhile alternative for business owners looking for robust spend controls and visibility.

What is a ghost card?

You’ve heard of virtual cards, debit cards, and credit cards. But what’s a ghost card? Simply put, ghost cards are credit card numbers assigned to different departments within a business. They’re similar to virtual cards in that they don’t exist in a physical, plastic card form.

However, whereas virtual cards tend to be created to make a single purchase to a specific vendor, ghost cards can be used repeatedly as a non-cash payment method for various business expenses.

Ghost credit card providers preach that itemizing expenses by specific departments is a revolutionary feature. This system expands purchasing privileges to more employees within the company, eliminating the need for expense reimbursement programs. You can also issue ghost cards to suppliers, which allows them to charge the company whenever they process an order.

If everyone with a ghost card number spends responsibly and ethically, this system can streamline reporting and invoice reconciliation. Unfortunately, it often doesn't work this way. One Forbes Advisor poll reported that 33% of small businesses note credit card fraud as a major issue.

Even without fraudulent or malicious intent, humans make mistakes and sometimes overspend. Ghost cards simply don’t offer the spend controls to prevent this.

Downsides of using ghost cards for business expenses

Ghost cards have a purpose in specific situations, like helping a family member in need or granting purchasing power to someone in a remote location. They’re just not a good fit for small business expense management. Corporate cards are a better option for a variety of reasons.

Vulnerability to fraud

Assigning a credit card number to an entire department is an invitation for team members to commit credit card fraud against your company. It could be something as minor as buying their morning coffee or supplying their home with paper goods and office supplies. Your accounts payable department might not detect this with a ghost credit card. Moreover, former employees may still attempt to use their department’s ghost card even after they’ve left the company.

Higher interest rates

Ghost cards are connected to your business credit card account number. That means you’re paying interest on unpaid balances. According to WalletHub, the average interest rate on a business credit card in 2024 is 22.16% for new accounts. If you carry a balance, you’ll be paying that on every department purchase made with a ghost card.

Lack of spend controls

Small business owners don’t have the luxury of carte blanche spending power, so they shouldn’t give it to their employees. It’s impossible to manage costs without spend controls. Ghost credit cards don’t offer them, which opens your business up to hefty bills at the end of the month.

No personal accountability

Sharing a credit card number with an entire department eliminates personal accountability. That puts pressure on the department head to monitor individual purchases. Unfortunately, most ghost cards don’t give them the tools they need to do that. This means misuse of company funds may not be revealed until the next budget review and will fall solely on the department head’s shoulders.

4 alternatives to ghost cards

There are several alternatives to ghost cards that could be a fit for your business. Choosing the right one involves evaluating how many purchases are made each reporting period, how many people are involved in purchasing and expenses, and the size of your business. Here are some of your options:

1. Corporate cards

Corporate cards come with spend control features, and many of them allow you to spin up unlimited virtual cards for ease of use. With a ghost card, the company assigns one credit card number to an entire department. That number is attached to the main business credit card. With corporate cards, you can itemize expenses by user and set expense limits at the individual card level. Modern corporate cards can even flag non-compliant spending automatically.

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2. Procurement cards

A procurement card (or p-card) is a corporate charge card issued to employees for small expenses that don’t need to go through a procurement process. They’re unique to the individual employee so that expenses can be tracked. Procurement cards are good for small businesses because you can set spending limits and help individual employees keep their expenses down.

3. Business credit cards

Business credit cards charge interest—but not if you pay the full balance off each month. They’re a good choice for sole proprietors and entrepreneurs who don’t need to monitor spending across multiple employees. Plus, they generally offer rewards programs you can use for travel or meal expenses.

4. Debit cards

A debit card works like a credit card but has a spending limit set by a preloaded balance. Many companies use debit cards to control spending or fund special projects. You can load the budget for different projects as needed and “recharge” the card when necessary.

Choose a more controlled alternative to ghost cards

Unlike ghost cards, Ramp’s corporate cards are a safe and secure option for businesses of any size. Spend controls are built in, and you can adjust them to fit unique situations. You can also request that users provide receipts for specific credit card payments after checkout.

Plus, our platform integrates via API to popular accounting software such as QuickBooks and Xero, and we offer a wide range of perks and pricing intelligence to help your company thrive and grow while saving money.

Ready to learn more? Explore our interactive demo.