Understanding Authorized Users on Company Credit Cards

Many credit card issuers permit cardholders to add one or more authorized users to their accounts. Each authorized user receives their own card, enabling them to make purchases independently of the primary cardholder. Business credit cards follow similar guidelines, allowing business owners or primary cardholders to request additional cards for employees to use for business purchases.

A prime example is the The American Express Blue Business Cash™ Card, which permits up to 99 authorized users (see rates and fees) on a single account. Typically, these authorized user cards feature the employee's name printed on them.

There are advantages and disadvantages to having authorized users on company credit cards, making it crucial to evaluate whether adding one aligns with your business needs. Here’s what you should consider before including authorized users on your company credit card.

Don't forget to establish spending limits

As a business owner, adding an employee to your business credit card introduces some extra risk. Authorized users are allowed to make purchases with their cards, but the primary account holder remains accountable for all transactions and must settle the charges at the end of the credit card billing cycle.

Setting spending limits on authorized user business credit cards is crucial for protecting the primary account holder from unauthorized charges or overspending. Most issuers enable account holders to set and adjust employee credit limits online, particularly when an employee needs to make a significant purchase.

Advantages of adding an authorized user to a business credit card

Employee credit cards can enhance business efficiency. If the primary account holder is unavailable, employees can still make essential purchases. This allows the business owner to manage expenses without requiring employees to submit receipts for reimbursement afterwards.

Adding authorized users to a company credit card also simplifies business travel for employees. They can use their cards to book flights, hotels, and car rentals. Typically, card benefits—like travel insurance, car rental insurance, and purchase protection—are available to authorized users as well.

For instance, the travel and purchase protections provided by The Business Platinum Card® from American Express are accessible to all cardholders on the account.

*Eligibility and benefit levels may vary by card. Terms, conditions, and limitations apply. For details, visit americanexpress.com/benefitsguide. Policies are underwritten by New Hampshire Insurance Company, an AIG Company.

If your business credit card offers rewards, you'll accumulate points whenever employees make purchases using their cards. This is because the rewards earned are attributed to the business rather than its authorized users.

Potential Drawbacks of Adding Authorized Users to a Business Credit Card

While there are numerous advantages, issuing authorized user cards to employees can also come with certain drawbacks. Let’s explore some potential disadvantages more closely:

Fees

Incorporating an authorized user onto a business credit card may incur additional costs.

While some business credit cards, like the Capital One Venture X Business card, permit the addition of authorized users without extra fees, others may impose an annual charge for this service, sometimes reaching hundreds of dollars.

Account Management Challenges

Having authorized users can complicate the management of accounts for a business. For instance, a business owner might wish to make a large purchase, but prior transactions made by employees could limit their ability to do so due to insufficient available credit.

To manage authorized users effectively on a company card, it’s essential to maintain open communication about the card's usage to avoid potential issues.

Financial Accountability

Ultimately, businesses bear responsibility for all charges on their credit card accounts, including those made by authorized users. Even if a business owner establishes spending limits on employees' cards, any irresponsible actions or unauthorized transactions fall under the business's liability in the eyes of the credit card issuer.

Impact on Credit Score

Although a business credit card is typically opened using a company's EIN, it may also reflect on the business owner's personal credit report. If employees mismanage the account, it can negatively affect the business owner's credit score.

Furthermore, late or missed payments can also affect an employee's personal credit if their social security number was used to add them as an authorized user, although this situation is generally rare.

Conclusion

Adding an authorized user to a company credit card can bring advantages for both the business and its employees. Business owners can efficiently manage expenses, earn rewards on employee purchases, and set spending limits for each employee.

Employees benefit from various card perks, including travel insurance and additional protections when using their cards for work-related expenses.

Keep in mind that the business is ultimately liable for all credit card transactions, including those made by authorized users. Therefore, it's crucial to monitor employee spending to avoid potential liabilities from improper usage.