What to Do When an Employee Uses the Company Credit Card for Personal Use
One of a corporate credit card's most useful attributes is also one of its riskiest: the ability for employees to spend money from their employer’s account.
There are quite a few common reasons your employee would use their company credit card independently, such as meals and travel for business purposes, as well as procuring materials for manufacturing or shipping. Problems arise, though, when your team members use their corporate credit card for personal purchases. This can be classified as fraud, theft, or embezzlement, which may carry legal consequences.
Mistakes do happen, though, and it’s always possible that the employee took out the wrong card in a one-time mix up. For instance, if the corporate business card is the same color as their own, they’ve got a decent alibi. However, repeated incidents and expensive charges are a compelling sign that the misuse is likely intentional. This not only carries severe penalties for the employee at fault, but can cost an organization thousands of dollars in lost funds if not caught right away.
Companies that take advantage of the Slash Visa® Platinum corporate card can feel more confident about the security of their accounts thanks to granular controls that make it easier to monitor transactions and block unauthorized charges before they happen.¹ In this guide, we’ll explore what to do when an employee uses their company credit card for personal finances, the consequences, and the best practices to prevent it from occurring in the future.
Understanding the Risks of Using a Company Credit Card
There are clearly outlined laws regarding the intentional misuse of corporate credit cards. By definition, company credit cards are intended for procurement of items and services relevant to that company, so any exceptions that appear to be personal can break those laws.
These cases typically fall under the umbrella of embezzlement, which United States law defines as the fraudulent taking of personal property by someone to whom it was entrusted. If you entrusted an employee with the “personal property” of your business credit card and employer account, and they took money for personal reasons instead of business expenses, it usually constitutes credit card fraud. If you didn’t actually entrust that employee with a corporate card (perhaps they slyly pickpocketed a colleague at the office), then that would likely be the exception that falls under the definition of theft.
If this does occur, there are consequences beyond broken trust and severed contracts. If your company intends on recovering the funds, you may need to take legal action against the employee. Repeated misuse can also damage your business's credit score, especially if the employee’s reckless spending overextended your credit limits.
Corporate credit card misuse also has the potential to invite an audit, as the IRS can recognize suspicious activity within the finances on your account. Misclassified spending can also mess with legitimate business tax deductions and lead to headaches.
When Misuse Happens: Accidental vs Deliberate
Before any direct action is taken, the employer should determine whether the misuse of the business credit card was accidental or intentional.
If the employee quickly notifies someone that they used the wrong card for a purchase and shows their receipt, it’s likely to be an honest mistake. If you come across an insignificant corporate credit card charge when accounting, like a payment for a water bottle at a gas station on a Sunday evening, you can check in with the individual to make sure it was an accident.
At the end of the day, how you want to respond to accidental card misuse is up to your organization. A quick meeting and reimbursement is enough to encourage most employees to be more mindful when carrying their business credit card with them.
Deliberate or malicious use, though, usually looks very different. It can look like repeated charges for all sorts of items, or it could be one large purchase that an untrustworthy employee put on the company account. Even if it’s one mistake, you can use your judgment when determining intent – for example, an employee could “accidentally” hook up their company credit card to one of their home streaming services, but we know how cumbersome it is to input card information to your TV. That payment wouldn’t be an accident.
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Determining Responsibility for Unauthorized Charges
When your employee uses the business credit card for a large, unauthorized purchase, who’s responsible for paying that money? Well… your company is. The business is on the hook for charges made to the business account, regardless of whether the transaction is legitimate or theft.
However, that doesn’t mean you can’t recover stolen funds from your employee. In certain contexts, there are legal avenues you can take that require the employee to reimburse.
Actions to Take When a Company Credit Card is Used Personally
Here are the steps you should take when you discover unauthorized corporate card charges:
- Confirm the misuse: Through an assessment of the charges and a discussion with the employee, determine whether it was a one-off mistake or an intentional decision.
- Record all relevant details: The time, place, and receipts of the transactions are all important factors to document in order to provide a clear picture of what occurred and what actions should be taken. This also helps clarify finances for the sake of expense reports.
- Determine appropriate next steps: If accidental, next steps can include meetings, and a quick reimbursement. If deliberate, however, you may choose strong disciplinary measures, termination, or even legal paths if the transactions are significant and the employee refuses to reimburse the funds.
- Revisit and clarify expense policies: Hopefully, your organization has thoroughly developed an expense policy that outlines the guardrails of business credit cards and what actions are to be taken if rules are broken. If these policies are in place, review them with the team – but if they’re not explicitly in the books, you should go ahead and create them.
- Strengthen oversight with the right automation tools: Some company cards come with software that enables total control, visibility, and insights into employee spending and expense reports. Here at Slash, we know a thing or two about that type of card.
How to Prevent Misuse of Corporate Credit Cards
Here are some ways to mitigate the risk of business credit card misuse before fraud, theft, or embezzlement occur:
- Select corporate credit cards that come with card controls that can block unauthorized purchases before they happen.
- Review expense policies to make sure they thoroughly cover guidelines, rules and consequences.
- Leverage virtual cards that limit expenses and allow full transparency into spending.
- Use an expense management system that supports approval workflow and can restrict purchases to approved categories.
Take Control of Company Spending With Slash
Clear policies, proactive monitoring, and powerful tools help businesses prevent company credit card misuse before it arises, and handle it efficiently if it does. It may be up to you to develop company policies, but you can leave the rest up to the Slash banking platform.
We offer the Slash Visa® Platinum corporate card, which provides access to a financial dashboard that allows spend limits, business expense categorization, merchant restrictions, and other customizable permission levels that help quell fears of employee misuse.
The Slash corporate card is founder-friendly and easily accessible, requiring only an EIN - no SSN, personal guarantee, or credit check. It’s secure and backed by 24/7 support. It also earns up to 2% cashback, supports business credit building, and offers free ACH transfers - features that might end up making your employees more eager to use them correctly.
Beyond the company card, the Slash banking platform offers global USD accounts for non-US entities, native crypto support, unlimited free domestic transfers, and integrations with accounting solutions like Quickbooks and Xero.³ ,⁴
Protect your company’s finances and streamline expense management with our suite of financial solutions. Thanks to sophisticated spend controls and increased visibility, unauthorized purchases and credit card fraud can be prevented before they happen.
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Frequently asked questions
Are virtual and physical business credit cards safer than traditional credit cards?
In most cases, yes. The “safety” of any company credit card is defined by its visibility and spend controls. While both can be misused, typical virtual and physical business cards (especially the Slash Visa® Platinum corporate card) have more control options, so they’re likely to be a wiser decision than traditional cards.
What's the difference between a charge card and a business credit card?
Both of these types of cards are commonly used for business expenses, but there's a key difference: business credit cards extend a revolving line of credit that accrues interest over time, while a charge card requires you to pay your balance in full at the end of each month. When it comes to choosing between the two, it largely depends on how an organization wants to handle its finances and what business expenses are most typical.
Charge Card vs Credit Card: 6 Key Differences You Should Know
Does using a charge card instead of a prepaid card reduce financial risk for businesses?
Prepaid cards draw directly from company funds that have been preloaded onto the card, while charge cards extend short-term credit that’s repaid in full each billing cycle. When it comes to the financial risk for businesses, it can simply depend on the amount of money the employer is entrusting an employee with on a prepaid card.
Prepaid Business Cards: How to Manage Employee Expenses and Maximize Control with Slash
