The Flaws of Company Credit Cards (And What Your Small Business Can Use Instead)

For some small-business owners, company credit cards are convenient for all kinds of reasons: No need to carry cash; no splitting bills; free technical support for sorting out problems; and so on. 

But the convenience and usefulness come with a price. Company cards can create uncertainty, extra paperwork, and even employee fraud. 

In this article, we’ll look at the drawbacks of using company credit cards and provide another alternative that may be more ideal for your business. 

Let’s get started.

What is a company credit card?

A company credit card gives employees access to a standardized payment method for business expenses.

The card is linked to the company's bank accounts, so any employee with permission can use it to pay for work-related costs.

For most companies, that means people can use it for everything – from office supplies and travel costs to train tickets and restaurant bills.

The drawbacks of company credit cards

Short supply of credit cards

When you give company credit cards to a minority of employees, it creates a two-class system that leads to frustration and resentment among those who don't have one.

And companies that do offer company cards often choose to give them only to executives or managers. That means junior staff members feel like they're excluded from the benefits enjoyed by their colleagues.

Lack of visibility

With company credit cards, you can't easily monitor how much employees are spending. The only way you can monitor credit card use is through the monthly statement you receive. Your employees can rack up expenses without you knowing, which increases the risk of fraud as we’ve mentioned earlier. 

Your only other option is to ask employees for clarification on what they purchased and hope they don't give you unhelpful answers or - even worse - tell you what you want to hear when the answer isn't true.

Business owners need spend-management platforms that give them real-time visibility into their company spend -- if anything suspicious occurs, you'll be able to handle it immediately.

Personal and business overlap

When employees are given their own credit cards, it's hard to monitor whether they're using them for business or not. Employees may also be tempted to use the card for personal purchases. No matter how much you trust your employees, these costs can easily slip through the cracks and result in wasted funds.

Extra paperwork

Credit cards increase the amount of paperwork your company has to do. Employees need to record their expenses, receipts must be checked and approved, budgets have to be negotiated with finance teams.

For many companies, that's not worth the extra effort when you consider all the other tasks on their plate.

The solution?

Use virtual cards instead

Virtual cards provide an alternative to company credit cards that can eliminate most of the problems we’ve mentioned above.

Here's what you'll love about them: 

You have full control

The beauty of prepaid cards is that they are under your full control. As the employer, you hold the purse strings. You provide the funds and decide when they should be topped up. That means you can ensure employees don't spend more than what you're comfortable with - but it also gives them the flexibility to make larger purchases, which you can pre-approve, by topping up their cards in advance.

Transparency and accountability

Another benefit of the virtual card system is that it's transparent and accountable. You can see how much employees spend, who they're spending with and what they're buying. This allows you to monitor their expenses in real-time, which helps make sure nothing slips through the cracks. This is much more practical than waiting for a paper statement to come in or signing up for an online service that charges a fee.

If you notice an employee making frequent and very high-value purchases, for example, it's easy to reach out and ask why.

Saves you time

You save time when you use a virtual card because all of your transactions are done online. You save money when you use virtual cards because you never have to print and mail paper statements or make copies of receipts — they are all available in your online account.

Less paperwork

Virtual cards can eliminate much of the paperwork associated with running your small business. Instead of needing to process sales receipts, you only have to verify transactions in your online account. You can also set up an automated email or text message that alerts you when a transaction occurs so that you do not need to comb through multiple pages looking for them.

Mobile payments

Providing virtual cards to your employees enables them to make transactions across a wider range of platforms. With traditional plastic cards, they can only use point-of-sale (POS) terminals and ATMs, but with mobile card readers, they can also utilize Apple Pay, Android Pay, Google Wallet, and other similar services. This makes it easier for your employees to complete transactions on the go.

Security

Virtual cards are more secure than traditional credit or debit cards because they are not linked to any of your personal accounts. If an employee loses a physical card, someone else can use it for their own purposes but with virtual cards, you have total control over how money is spent.

Quick and easy setup

It does not take long to set up a virtual card program for your business. In just a few minutes, employees can have the funds they need to complete their daily tasks and you can monitor all transactions with real-time visibility.

In conclusion, many benefits come with using virtual cards for your small business. By removing the hassle of paper statements, processing receipts, and checking available balances, virtual cards make it easy for your employees to complete transactions across a wide range of platforms and you can save time and money.

You can sign up for a free Penny Inc account today and issue your employees unlimited virtual cards at no cost.