Employee misuse of credit card: how to identify and solve it

Ryan Edwards-Pritchard
December 6, 2022

As your business grows, so does your team. And that means they’ll likely need a corporate card to make work-related purchases. This also means you're opening up the potential for employees to misuse company cards. 

That’s why you need an effective expense policy in place to set your business up for success. We get it: these policies are usually hard to implement and enforce due to a lack of visibility, reliance on manual data entry and slow approval timelines.

The good news is that there are practical ways to build self-policing expense policies that actively prevent credit card misuse (even before transactions happen). 

We’re diving into why an employee might misuse and spend more than they should on their company card and what systems and procedures you need in place to prevent it from happening. 

When might an employee misuse a corporate card?

Companies often issue corporate cards to their employees to manage work-related expenses like office supplies, SaaS subscriptions and travel expenses.

But with some corporate cards, it can be difficult to oversee every purchase, especially when the context of allowable expenses isn’t properly spelled out for employees. Let’s take a look at how an employee could potentially misuse a corporate card. 

  • Travel expenses: Whether your team is travelling interstate or overseas for work, things like flights and hotel costs are obvious allowable expenses. But sometimes, associated costs like meals or petrol may not be considered an allowable expense. This isn’t always made clear to the team. 
  • When there’s no expense policy: Without a proper expense policy in place or if the policy is vague and not explained to employees, there’s potential that employees can misuse their corporate cards without knowing. 
  • When there’s no training or guidelines: Without proper guidelines in place and effective training on how and when to use expense cards, employees can easily fall into the trap of misusing them. 

What should you do if an employee misuses a credit card?

Employee misuse of credit cards is bound to happen, particularly when you don’t have the right expense policy and processes in place. That’s why companies have to take proactive steps to ensure all team members are given a clear understanding of the dos and don’ts of spending. 

If an employee does misuse their credit card, here are the proactive, actionable steps you can take to address the problem: 

  • Have the right policy and processes in place: Companies must have a plan in place for stepping in and stopping the misuse of spending. Give clear statements to team members on what the policy is and what happens if it’s not followed so everyone is on the same page. 
  • Freeze the corporate card: If an employee misuses a credit card, remove access to the card as soon as possible to ensure no further spending can occur. 
  • Engage in conversation a with the employee: Sometimes, employees aren’t even aware they're misusing their credit card because there’s no clear expense policy in place. Conversations are important to figure out what went wrong and you can even have someone from the finance or HR department on standby. 
  • Figure out the root cause of the problem: Once you’ve understood how the misuse happened in the first place, you can take proactive steps to improve your policy, re-educate your team and make sure everyone understands what they can and can’t spend on. 

How can you prevent or minimise employee misuse of credit cards?

The best way to prevent and minimise employee misuse of credit cards is all about having the right systems and processes in place that your employees understand clearly and actually implement. Plus, there are corporate cards with features that prevent employees from excessively spending and blowing their budgets. 

Let’s take a look at practical ways you can prevent and minimise the misuse of credit cards:

  • Create a successful expense policy: Set clear categories and budgets by spelling out what is and isn’t an allowable expense and offer simple rules that are easy to understand. Plus, update your policy regularly to make sure excessive spending and fraud don't slip through the cracks and stay compliant with regulations and relevant laws. 
  • Go beyond just a document: Once you’ve created your expense policy you need to implement it and that means you need to train and properly onboard employees. This could mean running an all-staff onboarding session to get the team up to speed. 
  • Use a corporate card with built-in spend controls: Make sure you use corporate cards (like Cape) that have built-in spend controls to set custom limits for each employee and custom categories like accommodation, meals, subscriptions and more.

Ultimately, the best way to prevent employee misuse of credit cards is to have a well-thought-out expense policy in place that gives the entire team a framework on what’s an allowable expense and what isn’t. It ensures you’re making proactive decisions rather than responding to unexpected spending. 

Ryan Edwards-Pritchard
December 6, 2022