Credit cards for employees

Many employees are expected to finance their employers through the expenses system.  This is just a fact of life.  Credit cards can make this easier.

Many firms operate a “spend then get back” policy on expenses necessary for work.  The employee spends on the expense, fills in a claim form and the expense will get reimbursed over time.  There is no reimbursement for the interest that is lost. This can lead to the employee subsidizing the employer for hundreds of dollars if there is a lot of expenditure necessary for the job and the employee is paying an offset mortgage or other type of repayable loan calculated on daily interest.  Even if this is coming out of the employee’s current amount then there is a large amount of interest that is being paid out.

A credit card can deal with this issue through the operation of an interest free period.  Most credit cards offer an interest free period after spending is done on the card.  If using a credit card for expenses of employment it is a good idea to find a credit card that has as long an interest free grace period as possible, in this way they will be able to essentially borrow the money at an interest rate of zero per cent.

A rewards credit card, particularly a cash back credit card can be very attractive for employees who have to pay and reclaim for work expenses.  Rewards cards match spending to some sort of reward, such as shop vouchers.  Cash back cards can be particularly attractive as although non-cash rewards cards will give higher value rewards in general, cash from a cash back card can be spent anywhere.

Some employers dislike cash back cards, saying that employees are getting a further reward from their employment.  The IRS may also claim that this is income gained in relation to a job in the same way as a third party payment.  If the employee is worried about either of these two things happening then an affinity card can be a very good idea as these can’t be reclaimed and there is no way to claim that there is some sort of direct financial benefit.

It is a good idea to have separate credit card accounts for work and personal expenses.  This keeps paper work to a minimum.  It is still a good idea to keep all work expense receipts, as many expense systems dislike simply using credit card statements.