Who is liable for a corporate credit card?

How does corporate credit card liability work?

From restocking office supplies and paying for technology subscriptions, to securing bookings for business trips, companies need to make multiple transactions to operate day-to-day. Corporate credit cards allow employees to charge their authorized expenses to the company without the need to fill out lengthy claim forms. However, the way employees use their corporate credit cards can differ depending on its liability.

Liability determines who is responsible for making repayments on a corporate credit card. Depending on the terms, either the company or the individual employee will be responsible for clearing the balance.

What is an individual liability card?

With an individual liability corporate card, the employee must make payments directly to the issuer for all transactions they make on the account. They are then required to submit an expense report to receive reimbursement from their employer.

All companies with individual liability cards should outline the expense reporting procedure in their corporate credit card policy. This should include the monthly dates when employees must submit their expense reports and the details regarding the type of receipts required. They should also outline authorized usage, spending limits, and general terms of use,
One advantage of individual liability is that employees are more accountable for their business transactions, as they have to pay for them out of their own pocket. This reduces the risk of corporate credit card misuse.

Authorized cardholders may be subject to a credit check, which can affect their personal credit score. This is only temporary and the effects will be minimal. Any erroneous expenses that are rejected by the company and left unpaid could also result in the credit card issuer reporting the individual to the major credit bureaus.

What is a corporate liability card?

The responsibility for repayment on a corporate liability card lies solely with the company. This offers employees more financial relief, as they don’t need to pay upfront for their expenses or wait on repayment. Instead, the employer pays for all approved transactions.

Businesses with corporate liability credit cards still need to provide employees with a clear policy. It is important to state which transactions are permitted, as unauthorized expenses may require direct payment from the employee to the issuer. Companies may also implement expense reporting to help with reconciliation at the end of each billing cycle.

Issuers are unlikely to carry out credit checks on authorized holders of a corporate liability credit card. Just as with personal liability credit cards, however, employees could potentially see their personal credit affected if erroneous expenses are left unpaid for an extended period.