Home > Credit Cards > Important Warning If You Have a Corporate Credit Card

Comments 10 Comments

[Update: Some offers mentioned below have expired. For current terms and conditions, please see card agreements. Disclosure: Cards from our partners are mentioned below.]

Can you be personally liable for a corporate credit card you get from your employer? Can the business card you use as an employee of the company for which you work affect your credit rating? I dug into those questions recently after getting two emails from women who found themselves dealing with the spillover when their employers didn’t pay charges on the corporate cards they were issued.

The first email came from a woman who had relocated to another state to take a sales position. Her supervisor told her to charge her relocation expenses to the corporate card the company gave her. But when the job didn’t pan out, the company did not pay the bill and it now appears on her credit reports as a charge-off of just over $5000. About to buy a home, she was worried she would have to fork over the money to pay off the bill in order to get a mortgage.

The other woman who emailed me has been a contract employee for a firm that is now having financial problems. She was informed by the manager of that firm to stop using the corporate card he had given her for business expenses because he is no longer able to pay the bills. Her cell phone has been ringing off the hook with calls from the creditor. “Will this hurt my credit reports?” she asked.

To get to the bottom of this story, I talked with consumer law attorneys and contacted the major card issuers themselves. In large part, what happens depends on which type of corporate card you carry. It’s vital that you know the difference.

[Article: How Does a Corporate Card Affect Credit Scores?]

Two Types of Cards

There are generally two types of corporate cards. With the vast majority, the employee gets a card from his or her employer, the bill goes to the employer, and the employer is completely responsible for payment. In those cases, the employee is an authorized user and is not responsible to the card company for payment.

The other type of card, however, does carry individual liability. The employee fills out an application, gets the bills, gets reimbursed by his or her employer, then pays the card issuer. This type of card may affect the employee’s credit scores, since activity can appear on their personal credit reports.

Only one issuer, Capital One, stated it does not issue corporate cards that allow for personal liability on the part of the employee. “Employees are not liable for charges. They are not reported to bureaus and not responsible for the debt. The primary (accountholder) and business are jointly liable for the debt, not the employees,” said spokesperson Pam Girardo by email.

The other issuers I queried—American Express, Bank of America, Chase and Citibank—all said they offered cards with and without individual employee liability. Here’s what they told me…

[Resource: Get your free Credit Report Card]

American Express

Each company (or “employer”) determines how they want billing for their American Express Corporate Card program to work. In some cases, employees get their American Express Corporate Card bill.  The employee submits their expenses to their employer; their employer reimburses them; and the employee pays American Express. In other cases, employees get their American Express Corporate Card bill and submit it to their employer, who pays American Express. Companies can also choose to set up a “centrally billed account” in which the employer receives and pays the bills for designated American Express Corporate Cards.”

I wanted to clarify how employees would know if they could be personally liable for charges on their American Express Corporate Card and was told by email, “In most instances, employees fill out a Card application which includes disclosures about the product and the Cardmember’s responsibilities.”

In a follow up conversation, Molly Faust, vice president of public affairs for American Express told me, “From American Express’ perspective the individual will not be held liable as long as they have fulfilled their personal responsibilities in managing the account; for example, they haven’t used the card for personal expenses and have filed their expense report in a timely way.” There are some instances where an employee could be held liable for corporate card charges, and I was told cardholders should refer to their cardholder agreement to determine whether that’s the case.

She also told me that corporate accounts will not appear on employee’s credit reports “as long as they are in good standing.” Negative information about your corporate card can be reported if American Express determines you are personally liable for the delinquent charges.

[Article: New Study Examines Reliability of Credit Reports]

Bank of America

“We offer both corporate and individual/employee liability solutions for our clients.  If the client chooses corporate liability they are obligated to pay the bank. Any arrangement the company has with its employees for reimbursement is between the company and the employees.

If the company chooses individual liability for its program, then individuals are liable for the charges back to the bank, and the bank can collect the funds according to its contractual relationship with the employee.  For individual liability programs there is a contract between the employee/cardholder and the bank that is confirmed during the applications process.  Any changes to that contract are disclosed to the cardholder.”

I asked Bank of America to clarify how the individual liability program works. How would the employee know he or she would be personally responsible for the debt? I was told by email that “For individual liability programs, individual cardholders/employees typically will complete an application for the bank to review. This is our policy for individual liability programs. ”

Capital One

“Employees are not liable for charges. They are not reported to bureaus and not responsible for the debt. The primary and business are jointly liable for the debt, not the employees.”

At Capital One, we offer employee cards with unique account numbers so that the business owner can:

1. Track each employee’s spending separately not just online but also on statement

2. Set spend limits on how much each employee can spend monthly

3. If one card is compromised, the other cards can still continue to be used and active and are not affected.

[Product Spotlight: Get all 3 Credit Reports with Equifax’s 3-in-1 Monitoring with Credit Score]

Chase

“Ink from Chase offers free additional cards for employees with individual spending limits. However, employees are not personally responsible for payment. The authorizing officer of the small business who signs the application and the business itself are responsible for payment.

J.P. Morgan offers Purchasing Cards and Corporate Cards (travel and entertainment) to Large Corporate clients. For our Purchasing Cards, individual liability is not offered.  They are Corporate Liability only.

Corporate Card (T&E) programs can be Corporate, Joint & Several (J&S), or Individual Liability with a variety of billing and payment options.  The vast majority do not select to offer Individual Liability.  From a contractual, pricing, implementation and workflow standpoint, Corporate Liability and Joint & Several (J&S) Liability programs generally offer advantages over Individual Liability programs in areas such as: a stronger financial arrangement and the elimination of individual cardholder credit reviews.  Under Individual Liability, prospective cardholder credit reviews may limit distribution of cards and/or appropriate spending limits for traveling employees.

Some clients select Joint & Several, which means that they share the responsibility with the cardholder. While the liability for payment initially resides with the cardholder (up to a certain number of days), it then reverts back to the client.”

When I asked Chase to clarify how the employee would know he or she is personally responsible for the charges, and was told that the employee would fill out an application that states that they are personally responsible for the charges incurred, and the bills would come to the employee. In the individual liability scenario, the employee would pay the bills and be reimbursed by his or her employer.

Chase reiterated that “the Corporate Card offers Individual Liability as one of many options, but the vast majority of clients do not select to offer Individual Liability. Individual Liability for Corporate Card clients is not a best practice today.”

Citibank

“We offer two different programs. One is for large commercial card programs. For commercial cards, the employer can choose whether they want to bear the liability or if they want to bear joint liability (with the employee). In any program where the employee has liability they must complete an application accepting liability for the card.”

The other program is for the CitiBusiness Cards designed for small business. With these cards, “There is an authorized officer of the small business. The authorized officer and the business are both jointly liable. Should the authorized officer request that a card be issued to an employee, that employee would not be liable.” Spokesperson Emily Collins told me, “This is all clear through the application process.”

[Article: Bill for Small Business Cards Introduced]

The Bottom Line?

If you have a corporate credit card, it’s crucial that you understand what type of corporate or business card you carry, and whether it involves personal liability. If it does, and the company does not pay the bills, you could find yourself stuck with the bill, or suffer from damaged credit due to late payments that could be reported. Here are some things to keep in mind:

  1. Keep a copy of any application you sign for a corporate card.
  2. Read and keep a copy of the cardholder agreement you receive. If you do not receive one when you get your corporate card, request a copy.
  3. Submit your expense reports and receipts to your employer quickly, if required. Again, keep copies.
  4. Don’t use your corporate card for personal purchases. Period.
  5. If your card requires you to get reimbursed and pay the bill yourself, make sure you pay on time, even if your employer is slow to reimburse you. Otherwise, your credit may be hurt by the late payment.
  6. Get and save a written copy of your employer’s expense policy. It can come in handy if there were any disputes about whether purchases are permitted.

Has a corporate card come back to bite you? Share your experience in the comments section below.

[Credit Card Review: Business Credit Cards to Cut Travel Costs]

Image © Valentyn75 | Dreamstime.com

 

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Cilyn Myers

    My mother, the owner of a small business, passed away 10/2010. My husband and I were corporate officers of the business. My mother opened a credit card with Wells Fargo that was used to purchase materials for the business. Unfortunately, she ended up with a balance of over $5,000 on the card at the time of her death. My husband negotiated a settlement with WF to pay off the credit card with funds from the business. I recently checked my credit report and found that WF has included the balance and the write off amount on my credit score, and caused it to drop by 150 points in one year. Can I be held responsible for business debt that I was not involved in making?

    • http://www.Credit.com Gerri Detweiler

      Cilyn,

      I’d like to talk with you about your situation. Would you please email us at creditexperts (at) credit.com?

  • Jill culp

    Gerri,

    Just wanted you to know that cash advances were taken from the Wells Fargo accounts that were used to pay Cilyn and Charlie’s personal expenses; not business expenses. One example would be the payment of Cilyn’s car payments. I have all the documentation.

    Jill

  • Tamara Bryant

    If you never filled out an application and your credit was never run for a card, does that mean you’re not liable? Also, if it can affect your credit negatively, then shouldn’t it also affect it positively?

    • Gerri Detweiler

      Your liability depends on the terms of the corporate card. If you are an officer or manager in the firm, you should be especially careful as you may be held personally liable for the charges if the company doesn’t pay. Also, not everyone wants their corporate card to report positive information – since that could include debt that’s paid on time but which may affect the score.

  • http://www.Credit.com/ Gerri Detweiler

    Why is your boss contacting you about the balance? I am confused. You have to be careful – depending on the agreement employees (especially those who were officers in the company) sometimes are responsible for balances, depending on the cardholder agreement.

  • DontWantOne

    Can a company force you to use a corporate card?

    • http://www.credit.com/ Credit.com Credit Experts

      If you are asking if they could require that you use a corporate card (as an authorized user, not liable for payment) as opposed to using your personal card and filing for reimbursement, the answer is likely yes.

  • jules Vincent

    I was managing partner in a restaurant with a small percentage of the business we were incorporated in S corp. When opened 13 years ago I opened AX credit cards to use for the business. Now the original main partner still there and took outside new partners. The restaurant has been closed for the past 2 months for remodeling and change of concept. It will reopen in two months.
    So the corporation still alive, I lost my position of managing partner, when the restaurant will reopen I will be just an employee.
    Since we closed, the restaurant have not made any payment to AX, and AX keep calling me for the payment, that I can’t do I have no more access to the bank account and have no authority in the corporation to pay anybody. Now AX says that I am responsible for paying them, and if I don’t pay they will report me to the credit report company, because they have my social security from the original application.
    Am I liable for paying AX?

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team