Should you Give Managers a Business Credit Card?

Before TIP, I held C-Suite and was CEO of four past companies. Growing a company is hard, but empowering employees to help you succeed is always a sound business decision. However, giving them the ability to buy things and develop their credit or ruin it is a big responsibility and decision. I will help you plan for it in this article.

Issuing Credit Cards is a Big Decision

Issuing business credit cards to managers can feel like handing over the keys to a candy store. Done right, it’s a fantastic way to streamline expenses, empower your team, and keep things running smoothly. Done wrong? It’s a financial headache that could rival tax season. Let’s explore whether this move is right for your small business and, if so, how to do it effectively—and humorously—while keeping liabilities in check.

Why Credit Cards, not Debit Cards are the Way to Go

If your business is a rocket ship, then credit cards are the fuel tanks. Debit cards? They’re more like bicycle pedals—useful, sure, but not exactly launching you into orbit. When it comes to building credit and managing cash flow, credit cards leave debit cards in the dust, and here’s why.

Credit Cards Build Credit; Debit Cards Just Spend It

Think of credit cards as the overachiever on your financial resume—they report to credit bureaus, flaunting your good behavior (like paying on time) and helping you build a shiny credit history. Debit cards, meanwhile, are the quiet introverts who don’t tell anyone what you’re up to. No reporting, no credit-building. They’re great for groceries, but they won’t help you score that small-business loan or impress your future investors.

Emergency Expenses? Credit Cards Have Your Back

Ever had a surprise expense pop up? Like the office printer deciding it’s a toaster? Credit cards are your financial safety net, letting you cover costs now and pay later. Debit cards? They just stand there, draining your account and waving goodbye to your hard-earned cash. Plus, with credit cards, you can keep the lights on by paying the monthly minimum if things get tight. (Not ideal, but hey, at least the printer’s not trying to toast bread anymore.)

Perks, Rewards, and Free Money (Sort of)

Credit cards come with rewards—cashback, points, travel perks—you name it. It’s like getting a high-five from your bank for spending money you were going to spend anyway. Debit cards? Maybe they’ll give you a lollipop if you visit the branch in person, but that’s about it.

Fraud Protection That Won’t Sink Your Ship

Credit cards also have your back when things go wrong. Fraudulent charge? No problem. The bank handles it, and your cash stays safe. Debit cards, on the other hand, are a little less heroic. If someone drains your account, it could take days—or longer—to sort it out, leaving you scrambling for funds like it’s a bad sitcom plot.

When Times Are Tight, Pay the Minimum

Look, we all aim to pay off balances in full, but sometimes life happens. With a credit card, you can pay the minimum to keep things moving without tanking your credit score. Try that with a debit card, and you’ll just get a “transaction declined” message and a side of embarrassment.

Step 1: Why Consider Business Credit Cards for Managers?

Business credit cards for managers can simplify expense tracking, reduce cash flow bottlenecks, and build credit for your business. For example, if your marketing manager frequently attends conferences, having a business credit card ensures they can pay for travel, lodging, and meals without waiting for reimbursement. This streamlines your operations and avoids delays caused by personal cash flow issues.

Additionally, empowering managers with a business credit card enhances their ability to make quick decisions. Imagine your operations manager needing to replace a broken tool on-site. A business credit card lets them purchase immediately, preventing downtime and ensuring productivity.

Many business credit cards also offer perks, such as cashback, travel rewards, or discounts on office supplies. These rewards can add up quickly, saving your business money over time. Furthermore, responsible use of business credit cards contributes to building your company’s credit profile. This can improve your access to loans or better financing terms for future expansions.

However, before diving in, consider the potential risks and ensure you have the proper infrastructure to manage them effectively.

Step 2: Evaluate Your Business Needs and Risks

Issuing credit cards is not a decision to take lightly. Start by evaluating your business’s cash flow. Adding credit card balances could worsen your financial strain if your business struggles to cover monthly expenses. Ask yourself: Can we consistently pay off balances in full each month? If the answer is no, it might be better to hold off until your cash flow stabilizes.

Next, review your expense policies. Do you have clear guidelines outlining what qualifies as a business expense? For example, acceptable expenses include travel, office supplies, or client meals. If your policies are vague, issuing credit cards could lead to confusion or misuse. Consider whether managers have historically been responsible with reimbursements—if they’re frequently late or careless, they may not be ready for a credit card.

Finally, think about your team’s trustworthiness. A manager with a solid track record of financial responsibility is a good sign. However, it's wise to proceed with caution if you’ve had issues with mismanagement or poor judgment.

Step 3: Crafting a Foolproof Credit Card Policy

A firm credit card policy is the foundation for successful implementation. Start by defining allowable expenses in detail. For example, travel expenses could include airfare, lodging, and meals during a work trip, excluding upgrades to first-class tickets or lavish dining experiences. Office supply purchases might cover printer ink or notebooks but not high-end gadgets for personal use.

Set clear spending limits for each manager based on their role. For instance, a sales manager who travels frequently may need a higher limit than a supervisor who rarely leaves the office. Many business credit cards allow you to set custom limits for individual users, which can help you manage risk.

Require regular reporting to maintain accountability. Managers should submit receipts promptly—ideally within 48 hours of purchasing—to ensure accurate tracking. Monthly expense reports can help you reconcile statements and spot any discrepancies early.

Your policy should also include consequences for misuse. Be explicit: Unauthorized purchases must be reimbursed immediately, and repeated violations could result in losing card privileges or other disciplinary actions. Conduct a training session to ensure everyone understands the policy. Use humor to drive home key points, like reminding employees that “rounds of margaritas for friends are never an acceptable business expense.”

Step 4: Choosing the Right Bank and Card

When choosing the right bank for your company credit cards, it’s essential to evaluate your options carefully. The right decision can save your business money, help build credit, and streamline operations, while the wrong choice can lead to costly mistakes and financial stress. Below are key factors to consider and practical advice for navigating common challenges.

What Is a Good Starting Rate?

Interest rates are among the most critical factors when selecting a company credit card. A reasonable starting rate for a business credit card typically falls between 0% and 5% APR for an introductory period of up to 18 months. These introductory rates are ideal for companies that plan to carry a balance while they invest in growth.

However, standard rates can jump to 15%–25% APR after the introductory period, depending on your creditworthiness and the card issuer’s policies. To ensure you’re getting a competitive rate:

• Compare rates across multiple banks.
• Look for cards with fixed APRs for long-term predictability.
• Avoid cards with high rates masked by short-term promotional offers.

Starting with Bad Credit: Overcoming the Struggle

Finding a suitable credit card can be challenging if your business has bad credit. Many banks hesitate to issue cards to companies with a history of missed payments or high credit utilization. Here are some strategies to improve your chances:

1. Opt for Secured Credit Cards. These require a cash deposit as collateral, reducing the bank’s risk.
2. Work with Community Banks or Credit Unions: These institutions are often more willing to work with businesses with poor credit.
3. Focus on Improving Your Credit Score: Make consistent payments on other credit obligations and reduce overall debt.
4. Explore Business Loans or Lines of Credit: Some banks offer loans designed to help rebuild business credit.

By improving your payment habits and demonstrating financial responsibility, you can gradually qualify for better credit card options.

No Credit Rating? How to Start from Scratch

For businesses with no credit history, obtaining a company credit card may feel like a Catch-22. Without credit, getting approved for a card is difficult, but you need credit to build a history. Here are some tips for starting with no credit rating:

• Apply for a Secured Business Credit Card: Like those for poor credit, secured cards are an excellent entry point for companies with no credit history.
• Leverage Personal Credit: Some banks allow small businesses to qualify for credit cards based on their owners' credit scores.
• Work with Startup-Friendly Banks: Many online banks and fintech companies specialize in helping new businesses establish credit lines.
• Use Vendor Credit Lines: Building a history of on-time supplier payments can positively impact your business credit. Starting small and using credit responsibly can build a strong foundation for future financial growth.

Pitfalls to Avoid When Choosing a Bank for Business Credit Cards

While choosing a bank to issue your company credit card, avoid these common pitfalls:

1. High Annual Fees: Some banks charge hefty fees without offering significant benefits. Always weigh the cost against the perks.
2. Unclear Terms and Conditions: Look out for hidden fees, such as foreign transaction fees or late payment penalties, buried in the fine print.
3. Overestimating Your Credit Needs: Applying for a high credit limit you don’t need can lead to overspending or rejection.
4. Ignoring Rewards Programs: Select cards that offer rewards relevant to your business, such as cashback on office supplies or travel points for frequent trips.
5. Choosing the Wrong Bank: Big banks may offer convenience, but smaller institutions or fintech firms might provide better rates or personalized support.

Choosing the Right Bank to Issue Company Credit Cards

Selecting the perfect bank for your company's credit cards is like finding the right dance partner—you want someone who won't step on your toes and will keep up with your pace. Let's waltz through the key considerations sprinkled with a touch of humor to keep things lively.

What Is a Good Starting Rate?

Interest rates are the financial equivalent of blind dates: unpredictable and sometimes higher than you'd like. As of January 2025, the average credit card interest rate is 24.37% (Investopedia). However, some banks offer introductory 0% APR periods for business credit cards (Forbes). These offers can be a lifesaver, like finding out your blind date shares your love for dad jokes.

To ensure you're getting a competitive rate:

• Compare Offers: Don't settle for the first s
• uitor; shop around.
• Read the Fine Print: Some offers are like infomercials—sounds great until you realize there's a catch.
• Consider Fixed vs. Variable Rates: Fixed rates are the steady Eddies of interest rates, while variable rates can be as unpredictable as a cat on catnip.

Starting with Bad Credit: Overcoming the Struggle

Having bad credit is like showing up to a party with a ketchup stain on your shirt—it's noticeable but not the end of the world. In 2024, 42% of small businesses applied for loans from big banks, but only 68% were approved. If your credit score is doing the limbo, here are some steps to elevate it:

1. Secured Credit Cards: These are training wheels; they help you balance until you're ready to ride solo.
2. Community Banks and Credit Unions: These institutions are like your friendly neighborhood barista—they know your name and might give you a break.
3. To improve Your Credit Score, Pay bills on time, reduce debt, and avoid making large purchases, such as that yacht you've been eyeing.

No Credit Rating? How to Start from Scratch

Starting with no credit is like being the new kid in school—no reputation, good or bad. Approximately 28% of small and midsize businesses have no outstanding debt, which can be both a blessing and a hurdle. To build your credit:

• Secured Business Credit Cards: These are your credit-building buddies.
• Leverage Personal Credit: Mixing business with personal affairs can be as tricky as assembling IKEA furniture.
• Vendor Credit Lines: Establishing credit with suppliers is like getting a nod from the cool kids; it boosts your credibility.

Pitfalls to Avoid When Choosing a Bank for Business Credit Cards

Navigating the financial world is fraught with pitfalls, much like navigating a room full of LEGO pieces in the dark. Here are some traps to sidestep:

1. High Annual Fees: Some cards have fees higher than a giraffe's eyebrows. Ensure the benefits outweigh the costs.
2. Unclear Terms and Conditions: If the terms read like a Shakespearean play, ask for clarification.
3. Overestimating Your Credit Needs: Don't ask for a $1 million limit if you only need $10,000; it's like renting a limo to go grocery shopping.
4. Ignoring Rewards Programs: Choose rewards that align with your business needs; otherwise, it's like winning a lifetime supply of tofu when you're a meat lover.
5. Choosing the Wrong Bank: Bigger isn't always better. Sometimes, the small, local bank is the hidden gem.

Step 5: Avoiding Liability and Financial Pitfalls

Once you’ve issued credit cards, staying vigilant is crucial to avoiding liability. Regularly monitor transactions to catch any irregularities. For example, it's time to investigate if you notice repeated charges at a luxury retailer. Weekly reviews of card activity can help you identify and address issues early.

To minimize risk, limit the number of cards issued. Start by giving cards only to managers who genuinely need them, such as those responsible for travel or purchasing. Consider using virtual credit cards with pre-set limits instead of physical cards for occasional expenses.

Accountability is key. Have managers sign an agreement acknowledging the credit card policy and accepting responsibility for unauthorized purchases. This ensures they understand the stakes and are less likely to misuse the card.

To further protect your business, use reconciliation processes that match every expense to a receipt and an explanation. If a manager frequently “forgets” to submit receipts, address the issue promptly and consider revoking their card privileges.

Step 6: What to Do When Things Go Wrong

Even with the best policies in place, mistakes happen. If you discover unauthorized purchases, address the issue directly with the manager. Ask for immediate reimbursement and remind them of the policy. Depending on the severity of the misuse, you may need to take further disciplinary action.

If a card is lost or stolen, report it to the issuer immediately to prevent fraudulent charges. Many business credit cards offer fraud protection, but acting quickly is essential to minimize risk. To avoid disputes over expenses, maintain open communication with managers and ensure your policies are clear. If a misunderstanding occurs, use it to refine your policy and prevent future issues.

Step 7: The Bottom Line

Issuing business credit cards to managers is like owning a dog: It’s a lot of responsibility but can bring immense rewards if appropriately managed. You can empower your team while safeguarding your finances by evaluating your business needs, implementing a rock-solid policy, and staying vigilant.