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There are undeniable benefits of a company credit card. This is how some business owners establish corporate credit, and with a company card, it’s easier to track business expenses and meet other expenses. If you’re issued a company credit card by your employer, you might feel as if you’ve arrived. With this credit card in your pocket, you can pay for business luncheons and other business expenses, and not put the charges on your personal credit card.
But while a company card has it’s perks, they can be dangerous. It’s important to get all the facts before you accept a corporate card. For example, are you responsible for charges on the account, or will your employer cover expenses? And if you’re responsible for charges, will you send payments directly to the card company, or does your employer cut the check? Understand, however, that regardless of how this account is handled, a company card can have an impact on your credit score.
Even if you didn’t initiate opening the credit card account, your employer will supply the credit card company with your personal information – your name, Social Security number, date of birth and address. With this information on file, your name is attached to the credit card. Some employees mistakenly assume that company cards work differently, and that their actions with the card won’t affect their credit score. This couldn’t be further from the truth. A company credit card can appear on your credit report, and what you do with this card can make or break your credit score.
Let’s say your employer agrees to cover all business-related expenses. You might use the card freely and never worry about the bill. Because your credit is on the line, you might assume that your employer will act responsibly and pay the bill on time – but there are no guarantees. Different situations can prompt late payments on your employer’s part. Someone in accounts payable may forget to send the bill, or the company may purposely hold off on credit card payments until they generate additional revenue. Regardless of whether you’re faultless, a delinquency has serious ramifications. Your employer may get hit with a late fee, but it’s your credit score that suffers.
And what if your employer doesn’t pay the entire bill in full each month? It’s probably convenient for the company to pay only the minimum. But if you’re constantly adding new charges to the card, this can create a high balance in a short amount of time. This increases your personal debt to income ratio and lowers your credit score.
There are, however, ways to protect yourself with a company credit card. Checking your credit report and score frequently throughout the year can help you stay on top of your employer, as well as signing up for credit report monitoring. You’ll receive alerts when your credit score drops, or when negative information hits your report. Additionally, you might make a deal with your employer, in which you pay the credit card bill each month, and the company reimburses you for business-related expenses.