Change in Company Expense procedure

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jerome99
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Change in Company Expense procedure

Post by jerome99 » Mon Jul 22, 2013 10:29 am

My company is making a change from providing employees with a company credit card to having employees use their personal card and then turn in reports to be reimbursed.

I think this will allow my wife and I to gain more rewards points, however I am concerned that our credit rating may be affected by the large amounts of additional expenses that will be on the card. I guess I could get a second card, but not real interested in that hassle.

Currently my wife and I average a monthly credit card bill of around $4,500 and I think the business expenses will double that. So we are looking at a $9,000 a month credit card bill.

WIll this negatively impact our credit score?

FYI- This monthly balance will be paid off each month.

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Ted Valentine
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Re: Change in Company Expense procedure

Post by Ted Valentine » Mon Jul 22, 2013 11:22 am

Assuming you pay it off every month it will probably raise your score. If your credit is already good then this is nothing to be concerned with.
Although our intellect always longs for clarity and certainty, our nature often finds uncertainty fascinating.

Random Poster
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Re: Change in Company Expense procedure

Post by Random Poster » Mon Jul 22, 2013 11:29 am

Ted Valentine wrote:If your credit is already good then this is nothing to be concerned with.
I wouldn't go quite that far.

Although the OP states that "This monthly balance will be paid off each month," it isn't clear if the payments will be made solely out of the OP's own funds, with employer reimbursement to follow, or if the employer will always reimburse the OP promptly so that the payments will be made from both the OP's own funds (for those expenses attributable to the OP) and from the employer's reimbursed funds (for those expenses attributable to the job expenses).

Where I'm going with this is that if the OP's employer isn't prompt in providing reimbursements, then it could conceivably put the OP in a cash-crunch, given the right set of circumstances. Depending on the amount of control that the OP has in regards to their employer's expense reimbursement process, the end result may be something to be concerned with.

(As an aside, this is why I hate it when employers expect their employees to pay job related expenses on the employee's personal credit card accounts. As an employee, I'm not the employer's bank, and shouldn't be expected to help finance the employer's business operations).

bta15
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Re: Change in Company Expense procedure

Post by bta15 » Mon Jul 22, 2013 11:35 am

It depend a lot on what your credit limit is on the card.

If you only have a $10k credit limit and put $9k a month on it then it will definitely hurt your score. If you have a $30k limit you should be fine.

I would do two things. Make a mid month credit card payment to keep you balance low and call the credit card company, explain your situation and request a credit limit increase. Requesting a credit limit increase may result in a hard pull of your credit but still won't be a detrimental as carrying a high debt ratio vs credit limit.

hicabob
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Re: Change in Company Expense procedure

Post by hicabob » Mon Jul 22, 2013 11:58 am

I'd go with a separate card - it might seem like more of a hassle but keeping things separated is so nice when it comes to reimbursement.

TRC
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Re: Change in Company Expense procedure

Post by TRC » Mon Jul 22, 2013 12:01 pm

jerome99 wrote:My company is making a change from providing employees with a company credit card to having employees use their personal card and then turn in reports to be reimbursed.

I think this will allow my wife and I to gain more rewards points, however I am concerned that our credit rating may be affected by the large amounts of additional expenses that will be on the card. I guess I could get a second card, but not real interested in that hassle.

Currently my wife and I average a monthly credit card bill of around $4,500 and I think the business expenses will double that. So we are looking at a $9,000 a month credit card bill.

WIll this negatively impact our credit score?

FYI- This monthly balance will be paid off each month.
I travel a lot for work and opened up a separate credit card using AMEX w/ Fidelity. 2% cash back into my son's 529. I like having the 2nd card so we don't lose track of personal vs. company expenses. So far this year we're up to $1,200 in free money. Not a bad deal.

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doug91
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Re: Change in Company Expense procedure

Post by doug91 » Mon Jul 22, 2013 12:05 pm

I did this for years with a frequent flyer card, it was tremendous. I miss it terribly. We flew *everywhere* for free. Had I discovered this forum back then, I'm sure I would have done something responsible with the rewards. Thankfully, I hadn't yet. :)

After years of doing it and paying it off each month, my credit score was very high. I don't think you have anything to worry about.

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Kosmo
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Re: Change in Company Expense procedure

Post by Kosmo » Mon Jul 22, 2013 1:34 pm

Random Poster wrote:Where I'm going with this is that if the OP's employer isn't prompt in providing reimbursements, then it could conceivably put the OP in a cash-crunch, given the right set of circumstances. Depending on the amount of control that the OP has in regards to their employer's expense reimbursement process, the end result may be something to be concerned with.
Exactly. If your company is anything like mine, they will not be prompt reimbursements. If they are paying directly to the card, you have to make sure they pay on time and you do not incur any late fees or get charged interest on balances. If they pay you, then you have to have enough cash every month to pay the bill before you get reimbursed.

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prudent
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Re: Change in Company Expense procedure

Post by prudent » Mon Jul 22, 2013 1:47 pm

bta15 wrote:It depend a lot on what your credit limit is on the card.

If you only have a $10k credit limit and put $9k a month on it then it will definitely hurt your score. If you have a $30k limit you should be fine.

I would do two things. Make a mid month credit card payment to keep you balance low and call the credit card company, explain your situation and request a credit limit increase. Requesting a credit limit increase may result in a hard pull of your credit but still won't be a detrimental as carrying a high debt ratio vs credit limit.
That would be my concern also - driving up balances so they might be reporting a very large % of available credit in use (depending on the credit limit of the card). That would not be a good thing at all.

jlawrence01
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Re: Change in Company Expense procedure

Post by jlawrence01 » Mon Jul 22, 2013 4:17 pm

As a former frequent traveler (200+ nights) and retired corporate controller, these are my concerns:

1) How quickly will I be reimbursed? Our rule was if the expense report was approved on Wednesday, the funds would hit your account the next Monday. That way, if you were prompt, you had the money for 2-3 weeks prior to the due date. I know that some companies try to improve cash flow on teh backs of teh employees.

2) How stable is the company? In other words, are you sure that they won't shut down sticking you with $5-10k in credit card bills.

Personally, I always preferred to use my own card rather than those infernal Corporate Amex cards.

I agree with the other posters in that you should NOT let this change get to a point where you are using over 50% of your available credit. I would also suggest that you try to maximize your travel/ cash back bonuses. There are so many available options out there these days.

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Ted Valentine
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Re: Change in Company Expense procedure

Post by Ted Valentine » Tue Jul 23, 2013 10:21 am

Random Poster wrote:
Ted Valentine wrote:If your credit is already good then this is nothing to be concerned with.
I wouldn't go quite that far.
The OP's question was regarding his credit score and that is what I was referring to. Utilizing all of his available credit and paying it monthly is not going to affect his credit score in a way that has any affect on his life. Its not worth being concerned about.
Although our intellect always longs for clarity and certainty, our nature often finds uncertainty fascinating.

orlandoman
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Re: Change in Company Expense procedure

Post by orlandoman » Tue Jul 23, 2013 10:52 am

Ask to company to give you an advance of 'X' dollars that will be settled after you terminate employment with the company. The advance will be used to settle your cc account pending receipt of expense reimbursement.
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sport
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Re: Change in Company Expense procedure

Post by sport » Tue Jul 23, 2013 11:11 am

orlandoman wrote:Ask to company to give you an advance of 'X' dollars that will be settled after you terminate employment with the company. The advance will be used to settle your cc account pending receipt of expense reimbursement.
+1. It has been a long time. However, when I traveled for a company that did not provide a credit card, they would always provide a cash advance if it was requested. The amount of the advance varied with the length of the trip and expected expenses. The expense account form had a place where you would subtract the amount of any advances from your expenses to determine the amount of reimbursement due. In my case, the company actually gave me cash, I would deposit it, and then use my own credit card. Some other employees just used the cash on their trips.
Jeff

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hand
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Re: Change in Company Expense procedure

Post by hand » Tue Jul 23, 2013 11:44 am

jerome99 wrote:My company is making a change from providing employees with a company credit card to having employees use their personal card and then turn in reports to be reimbursed.
Companies having employees use their own cards isn't uncommon, and something I saw as a benefit when I was working for one. (1% cash back on tens or hundreds of thousands of dollars in business travel? Yes please!) That being said it seems slightly unusual for a company to move from a corporate card to individual cards - any chance this is a sign the firm is in financial trouble?

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Jay69
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Re: Change in Company Expense procedure

Post by Jay69 » Tue Jul 23, 2013 11:49 am

hicabob wrote:I'd go with a separate card - it might seem like more of a hassle but keeping things separated is so nice when it comes to reimbursement.

+1, at the level of spending/month I would keep it simple and separate. I use my personal card for work but we are only talking $200 every other month.
"Out of clutter, find simplicity” Albert Einstein

NewtonsApple
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Re: Change in Company Expense procedure

Post by NewtonsApple » Tue Jul 23, 2013 12:09 pm

If you are worried about the effect of the spending on your credit, you could apply for a charge card (different than a credit card). These are not designed to have a revolving balance and therefor the amount of spending on the card does not appear on your credit card unless you fail to make a payment. They are available in some form from most CC companies.

I currently use the Chase Bold card. This is a business oriented card. I do some consulting work so the business is a sole proprietor under my own name.

Charge cards work very well if you need to carry very high balances at times, but are very confident you will be reimbursed.

Also remember that credit reports are mostly a snap in time, so paying down balance in the cycle before needing to apply for new credit takes care of everything.

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Watty
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Re: Change in Company Expense procedure

Post by Watty » Tue Jul 23, 2013 12:14 pm

Do get a separate card and only use it for the business expenses.

I know people that have racked up credit card interest when the company was slow to reimburse them and they then expensed off the interest. They had to push for this but it was easier to do since it was all company expenses. This also helped end the intentional slow reimbursement that the company did.

If you will be renting cars internationally then the rental company may place a large pre-approval amount on your credit card that they will use if there is damage to the car. This reduces your available credit. This may not be quickly removed when you return the car so if you are near your credit limit this could cause problems.

Be careful with the "business" credit cards. The problem is that you don't have nearly the protections with a "business" card that you do with a consumer credit card. That is why the credit card companies tend to push the "business" versions of their cards.

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kenyan
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Re: Change in Company Expense procedure

Post by kenyan » Tue Jul 23, 2013 12:21 pm

Ted Valentine wrote:
Random Poster wrote:
Ted Valentine wrote:If your credit is already good then this is nothing to be concerned with.
I wouldn't go quite that far.
The OP's question was regarding his credit score and that is what I was referring to. Utilizing all of his available credit and paying it monthly is not going to affect his credit score in a way that has any affect on his life. Its not worth being concerned about.
Not necessarily true. The credit bureaus don't care if you pay it off monthly. They care about (a) what the balance is at the time they pull it (versus the limit), and (b) if you are delinquent. A bank will also look at the monthly payment on such an account and use it in determining your loan eligibility. Will this affect your life? I guess that depends - likely not, but it could ding your credit by 10-20 points. We saw it happen to my wife's credit in between pulls for a mortgage.
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mhop
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Re: Change in Company Expense procedure

Post by mhop » Tue Jul 23, 2013 12:52 pm

Utilization ("debt"/credit) will increase, so there's a chance your score may slightly decline. I'd echo everyone's comments to get a second card. The benefits of running expenses through a credit card can be outstanding, but with that in mind focus on what benefits you want and do your research.

From a personal perspective, our company gives us the option of using a corporate charge card or a personal card for expenses. What they won't tell you, though is that a corporate card is still guaranteed through your personal credit so if your score was low you got a low limit and if your score was higher you had no limit. Having said that, running personal expenses through the corporate card is frowned upon, and to an extent can be a resume generating experience. I would always recommend a personal card to personally pick the one that benefits me the most (i.e. a Fidelity 2% card or an airline card for travel). My reimbursements are tracked via our time reporting, so the card you put it on doesn't really matter as much as the question of whether or not that transaction for $X hit my account to cover the expenses. If the day comes where my company defaults on its obligations to me, I will send a detailed email to HR and go from there. At worst, I can simply refuse to travel until my debt is repaid, find another job, and/or take them to small claims if need be.

freebeer
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Re: Change in Company Expense procedure

Post by freebeer » Tue Jul 23, 2013 3:24 pm

hand wrote:
jerome99 wrote:My company is making a change from providing employees with a company credit card to having employees use their personal card and then turn in reports to be reimbursed.
Companies having employees use their own cards isn't uncommon, and something I saw as a benefit when I was working for one. (1% cash back on tens or hundreds of thousands of dollars in business travel? Yes please!) That being said it seems slightly unusual for a company to move from a corporate card to individual cards - any chance this is a sign the firm is in financial trouble?
I don't think it's even slightly unusual. A Fortune 1000 company I worked for that was exceptionally solvent (billions in cash) made this change a number of years ago. The reason for the change was accountability: it minimizes misuse because it puts the onus on employee to submit expense reports.

KyleAAA
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Re: Change in Company Expense procedure

Post by KyleAAA » Tue Jul 23, 2013 3:31 pm

Like stated above, unless you have a very low credit limit it shouldn't affect your credit one way or another. On a positive note, I netted around $700 in cash-back rewards for business travel alone last year. It can be very, very nice.

Luke Duke
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Re: Change in Company Expense procedure

Post by Luke Duke » Tue Jul 23, 2013 3:40 pm

My SSN is tied to my corporate card, so I imagine that I am ultimately responsible to make sure that the balance is paid. This is why I use my personal card when I can. I get the miles and I am in control of payments.

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carorun
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Re: Change in Company Expense procedure

Post by carorun » Tue Jul 23, 2013 4:08 pm

Luke Duke wrote:My SSN is tied to my corporate card, so I imagine that I am ultimately responsible to make sure that the balance is paid. This is why I use my personal card when I can. I get the miles and I am in control of payments.
Correct on payment responsibility. The one main difference between the corporate Amex and a personal (and the reason I use the corporate over personal at the expense of points) is that if my reimbursement is delayed for any reason, I can call Amex and push out the due date on the corporate card, plus there's an automatic 25 day grace period past payment due date. On a personal card, I would have to pay the balance or pay interest, and since some month's charges run from $3k-10k (I travel often), I'm not comfortable tying up my personal cash flow to avoid interest.

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