A company-paid credit card is a two-edged sword.
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It can get you first-class treatment when you travel and dine out. And, depending on your company, you also may get to keep the rewards you earn.
But there's also another side to company plastic. The accounting department is looking over your shoulder on every purchase. The card issuer may elect to check your personal credit. You could be technically responsible for any purchases you make if your company goes under without paying. They're not so rewarding either: Fewer companies are opting for corporate cards that offer rewards.
So before you start doing the happy dance at the prospect of playing high roller with a corporate card, here are six things you want to ask:
1. Who pays the monthly bill?
With almost two-thirds of corporate travel cards, the bill goes straight to the corporation, says Richard Palmer, founder of RPMG Research Corp., which conducted a 2011 survey on travel cards.
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That also tracks with what Citi sees with its clients, says Paul Horn, global products manager for Citi commercial cards. "In our experience, the vast majority of corporations elect for corporate liability."
According to the RPMG survey, individual employees are responsible for the bills about 23% of the time, Palmer says. Under that model, the company supplies the card, the bill goes to the employee's house and the employee pays it, he says. Typically the employee submits an expense report for reimbursement.
In the last 12% of cases, the liability is shared in some way, Palmer says.
In those cases, "everyone is responsible for paying the bill," says Horn. "And practically, it means that first we go to the employee."
While a follow-up study will be released later this year, Palmer doesn't expect the numbers to shift all that much. "Liability arrangements don't change overnight," he says.
American Express's corporate card, for example, is a joint liability card. Your personal credit won't suffer if payments are late, giving plenty of time for arguing back and forth with your accounting department over whether that extra night's layover in Atlanta was your expense or theirs. After 180 consecutive days without payment, though, AmEx reports the late payment to the credit bureaus, which will hurt your credit.
2. How do the rules on a corporate card differ from those on my personal cards?
News flash: The Credit CARD Act doesn't apply to business or corporate accounts.
"A corporate card is not protected by the CARD Act or the Truth in Lending Act," says Chi Chi Wu, staff attorney for the National Consumer Law Center.
Bottom line: While you may be a seasoned credit veteran, that corporate card may not carry some of the protections that you're used to with your personal plastic.
"Universal default, double-cycle billing, multiple over-limit fees -- a lot of these approaches which cannot be done on consumer cards can still be done on corporate cards," says Michael Simkovic, associate professor at Seton Hall University School of Law.
The good news for a lot of corporate card users: Many card issuers grant those CARD Act protections anyway, as a matter of practice, says Wu. "But people should be aware there is a difference. And, legally, there is a difference."
The take-away: Don't take anything for granted. Before using the card, familiarize yourself with its rules, says Wu. When you get those snail-mail updates in tiny type, grab a magnifying glass. Or call the toll-free number.
Another important question: What are the card limits?
Both corporations and card issuers can request different credit limits (daily and total credit line) for individual cards on the same corporate account.
Apart from that, most companies also have guidelines on how much they allow you to spend per day on things like meals and hotels, says Kathleen Archambeau, author of "Climbing the Corporate Ladder in High Heels" and adjunct business faculty at the University of San Francisco.
"Don't go over the number," she says. "That's the rule."
3. Will the card issuer check (or monitor) my personal credit?
Even if the company is responsible for the bill, some card issuers will check the employee's personal credit before (or periodically after) issuing credit.
With American Express corporate cards, "creditworthiness for a card is done on initial acceptance of the card," says Christopher Hollins, vice president and general manager of global corporate payments for American Express.
The employee's credit is then monitored "on an ongoing basis," according to Christine Elliot, vice president of corporate affairs at the card issuer.
Do you pay the bill and get reimbursed by the company? In that case, 58% of those companies will require a credit check, compared to 5% for corporate liability cards, says Palmer. Your boss or the issuer will need your permission to check. And that first-time, pre-card inquiry (but not the subsequent monitoring) could cost you a few points on your credit score for the next 12 months, according to credit scoring giant FICO.
Will the account show up on your personal credit history? It might, says Wu, depending on the card and the type of account.
"My understanding is that if it has your name on it, it generally does -- but check with your issuer," says Danielle Fagre Arlowe, senior vice president with the American Financial Services Association.
If you're liable for charges, "the card will probably show up on your credit history," says Simkovic. But even if you aren't, it could still pop up, he says. "If you're not liable and not a guarantor, it shouldn't. But I can't say with certainty that it won't."
Though with an American Express card, the answer should be "no," says Hollins. "I look at my own credit history on a regular basis, and in my entire working career, it's never been on my credit."
Posting to your credit history isn't always a negative, says Joseph Rosenbaum, partner at Reed Smith. If your account is well-managed, "it can actually enhance your credit."
4. What charges are prohibited?
If you're being trusted with a corporate card, you probably already know it's only for business.
But, beyond that, there may be some other expenses on your company's "no charge" list. They can include:
- Upgrades. Unless you have a work-related reason for wanting that larger rental car, bigger room or better airline seat, "it's for personal, not for business," says Sukhi Sahni, spokeswoman for Capital One (which issues corporate cards only for its own employees). Skip it or pay the upcharges yourself.
- Car refueling surcharges. The rental car company's fee for refilling the tank is often steeper than the price at the pump. Many corporations won't reimburse you, says Sahni.
- In-room pay-per-view movies. Either bill it separately to a personal card or watch through your own accounts on your laptop or tablet, she says.
- Large meal tabs for internal staff. If you're not entertaining clients (i.e. spending money to make money), big restaurant bills can raise eyebrows, says Archambeau.
- Certain hotels. You may have a spending limit for the cost-per-night at hotels, or be limited to certain chains, says Hollins.
- Tipping. Awful as it sounds, some companies set a limit on tipping, says Arlowe. One large company caps gratuities at 15%, so its employees leave any additional portion in cash, if they want to leave more, she says.
- Cash withdrawals. "I would totally avoid that," says Arlowe.
Also find out what free services come with the card, says, Hollins.
Many corporate cards offer a menu of benefits, from roadside assistance to travel insurance, he says. So, barring exigent circumstances, those won't be things you'll have to charge, either.
5. Who pays late fees?
Late paying your card bill? Or with the expense report that accounting needs before the company can pay it?
Depending on the card and your company, you could have to pay any resulting late fees.
Some companies require you pick up the charges if you're late, while "others are more lenient," says Hollins.
And with some cards, "the company gets a report that lets them know if they have employees who have incurred late fees," he says.
So find out how soon you can file those expense reports. "Put an alarm on your calendar," says Arlowe. "Do it the day you get back from a trip. Do it immediately."
The risk: "Sometimes overachievers tend to be really busy," she says. "It's easy to look at the next work deadline. But if you've been given a corporate card, you need to treat that as your No. 1 responsibility."
6. What is and isn't considered 'business' with this card?
Grabbing an airport snack between flights when you're traveling for work is often seen as a legitimate business expense in many offices, says Archambeau. "What people spend in an airport for [food] as they're traveling 50% of the time is generally thought of as a cost of doing business."
But that mani/pedi at the airport salon? Not so much.
"Do that on your own dime," she says.
Not using the card? Lock it up, either at home or at work, says Jim Burroughs, professor at the University of Virginia's McIntire School of Commerce.
"To me, putting it in your wallet, forces you to make a very deliberate decision ahead of time," he says.
Another savvy question: Who gets any card rewards?
Many companies see those points or miles as a perk for employees who spend a lot of their life on the job, says Archambeau.
But relatively few companies are using cards that offer rewards, says Palmer. One possible reason: rewards programs represent "a trade-off" for corporations, says Horn.
"There's a cost of providing those reward programs," he says. "So if it has a program with rewards, it means the company itself is forfeiting some of the benefits that the company itself could realize."