Tuesday, 24 January 2012

Benefits and traps of a Corporate Credit Card

Given that I have had the benefit of a corporate credit card (and having been recently bitten by that same card) I thought I would give an overview of good ways to use them - and how to personally benefit from a corporate card.

Corporate cards are normally given to employees who regularly have corporate expenditures to avoid the hassle of cash reimbursements. Run of the mill expenses that these cover include taxi's home (for those who often work late), meal budgets (again for those who work late) and corporate event expenditure for those who are responsible for booking / paying for these events.

My experience was with the American Express corporate card. The way the system worked at my previous employers was that I would incur expenses on the card, keep the receipts along with client charge codes for those receipts. Once a month my personal assistant would then take my receipts and put them through the system and I would get reimbursed about 2 weeks before the bill was due so I could pay it. The reason the company didn't pay the card off itself was that if they did not approve of the expenditure then they would not reimburse you for it and you had to pay for it personally. My normally expenditure in a month ranged from $2000 - $3000.

There were two big benefits to using the card (if you did it properly)

  1. I could use the points that accrued on the card for personal purposes. Although this does seem like a rather minor point, I ended up getting about $250 - $500 worth of gift vouchers every year from the system which was essentially free money

  2. I did not pay off the account as soon as I received the cash. As the reimbursement was typically deposited in my account 2 weeks before the bill was due, I would transfer this amount to my offset facility for my home loan and therefore pay less interest. Again this amount may seem trivial but it cost me nothing and I would save !~$100 per year in interest. This sort of return associated with any sort of risk or if it required any of my own capital is totally not worth it but given that it wasn't my money and it cost me nothing it was a no brainer.

I used the above system effectively for the last 3 years at my previous employer. The problem arose when I switched employers. My corporate credit card was cancelled in October when I left however in December I received an overdue notice from Amex for charges (relatively minor) incurred in December. I tried to sort it out with my previous employer but they are not that helpful given I am no longer an employee there. I then tried to find out from the vendor what the charges were for however given they were taxi charges the business owner was on leave for the Christmas holidays.

Under normal circumstances I would have paid the bill and tried to sort out the issue later. The problem is that when vendors refund credit card charges, they refund them to the card they were charged against which in my case has been closed already. In the meanwhile late charges etc. build up and American Express has been remarkably unhelpful. I think I will end up just paying the amount so that it does not affect my credit rating too badly but for all those with corporate cards you need to keep in mind that this may happen.

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