Depending on the card — or the bank backing the card — you could be liable for purchases you've made. If the bill comes directly to you, you're probably responsible for late fees and finance charges. And in some circumstances, if the payments are late, it's your credit rating that will suffer.
"Using the company credit card is equivalent to dating the boss's daughter," says Wayne G. Bogosian, managing director of the PFE Group, a financial education firm. "You'd better know what you're doing and not get out of line. Why? Because everything you do will be known and scrutinized. If you mess up, you will lose your job."
Before your boss hands you that shiny new plastic, ask a few questions. First, what's the reimbursement policy? Some companies have centralized billing, which means you charge and all bills are sent to and paid by the company directly.
"Three to four years ago, more and more organizations started moving to centrally billed corporate cards," says David Cramer, a senior vice president with Visa USA.
But in larger companies with hundreds or thousands of employees, some card issuers report that individually billed cards are easier and more popular.
With these, the credit card company sends the bill to you. You pay the bill and get reimbursed.
In the real world, there can be a lag between the charge, when you file your expenses and when you finally get a check. If the credit card bill comes due in the meantime, you may have to dip into your personal account to cover company expenses.
"In many, many companies across the U.S., employers actually see credit cards as a float mechanism," says Bogosian. "That's sort of the reality of an expense account."
Liable for various fees
Or, if you decide to pay the bill late after your expense check comes in, you will likely have to pick up late fees and finance charges out of your own pocket. "Finance charges and late fees are usually not reimbursable," says Bogosian. Some other charges you might have to eat: cash advance fees, over-limit fees and excessive currency-conversion fees.
It's also smart to know what benefits, such as travel or auto rental insurance, come with the card. If you don't know and opt to pay extra for these features, your company could ask that you pay that portion of the bill yourself, he says.
If you or your company is late paying your bill, will that affect your credit rating? That depends on which card you carry, and just how late it is.
"It all boils down to whether or not the creditor will report that account to your personal [credit] report," says John Ulzheimer, business development manager for MyFico.com, a division of Fair Isaac Corp., the company that developed credit scoring. "In most cases, we don't see it."
"If you're late with payments, typically most issuers do not report the commercial payment experience to credit agencies," says Cramer. "Only if you go terminally bad would there be some type of impact."
With Advanta Corp., one of the largest issuers of business MasterCards, "it should not come back to hurt the credit rating of an employee," says David Weinstock, the company's chief accounting officer.
But it's different with American Express. "It does reflect on your individual credit rating," says Channing Barringer, spokesperson for American Express.
Who's on the hook?
If the worst happens and your company doesn't pay the bill or goes out of business, what happens to the charge slips you've signed?
It can vary with the card, and this is where is pays to do your homework. Some card issuers, like Advanta Corp, go after your company.
"Our practice is to go after the business. Then we would go to the person who signed the [credit] application," usually a business owner or officer, says Weinstock.
With Visa USA, the chances you'd be on the hook would be "pretty slim" even when you're the one actually paying the bill, says Cramer. If the card is centrally billed, "the cardholder would never have any responsibility at all."
Others, like American Express, will expect you to pay whether your company uses centralized billing or not. "Ultimately card members are responsible to pay off that debt," says Barringer, who says that's all spelled out in the card member agreement.
Avoid personal use
The best way to stay out of hot water with company cards? Use them for legitimate business use only.
If you "borrow" by making charges on your company card and think you can pay off the bill before anyone is the wiser, you're kidding yourself. Thanks to computerized tracking systems and real-time account scrutiny via the Internet, your office can see what's in your shopping bags before you get home. Besides, just because the bill comes directly to you doesn't mean your boss doesn't also get a copy.
And keeping your professional and personal spending separate can be doubly important in cases where your company has you traveling on behalf of a client who also could see a copy of your expenses, says Bogosian. Do you really want them to see Victoria's Secret on your bill?
But the real problem comes when an employee uses the card because he's in financial hot water and then can't pay the bill at the end of the month. Now he has a financial problem that could endanger his job.
An offer you can't refuse?
So what if you don't want a corporate card?
"There are a lot of times you're between a rock and a hard place," says Craig Greene, a CPA and partner in the Chicago firm of McGovern & Greene LLP. "In order to be reimbursed, you have to use the company credit card."
So, can you just say, "Thanks, but no thanks"?
"If you don't need it for your day-to-day job, then I think you're on firm ground to say 'No, I don't want the credit card,' for whatever reason," says David Highlands, director of litigation and forensic services for McGovern & Greene. "However, it's going to be frowned on for someone who travels a lot and needs a credit card. If that employee has credit issues, it might be more difficult to look the other way."
You can protect yourself in a couple of ways.
• Unless you have a card that is billed directly to the company, find out when the bill is due and make sure it's paid on time every month. Ask what the company expects you to charge and what's prohibited. And what does the company expect you to do if the expense check hasn't come through by the time the bill is due? Will the company pay late fees and finance charges or is that your problem?
• Check out the personal agreement you have with the credit card company, if any. The policies with various cards can differ depending on the bank. Get it in writing.
"Employees being offered a company card should read very carefully anything they are given to sign regarding that credit card," says Myles H. Alderman Jr., partner in Alderman & Alderman, a Hartford-based law firm. "My suspicion is that more employees guarantee debts than know they are guaranteeing them."
Questions or comments?