The Dirty Secret About Corporate Card Fees

By The Center Team on March 28, 2022

The history of why corporate credit card fees exist and how modern expense management software with integrated corporate credit cards offers relief from those fees entirely.

We pay fees and fines all the time in our personal lives.

  • Late library book? That’ll be a 10 cent fine, per day.
  • Get caught speeding? Expect a hefty ticket, not to mention a rate increase on your insurance.
  • A weekend at a boutique hotel? Surprise! Here’s a $25/day resort fee.

At work, thankfully, fees and fines aren’t the norm. You don’t pay a fine for showing up late for your scheduled shift. There’s no fee to schedule a day of vacation or convenience charge subtracted from your paycheck.

There is one exception, however. Many organizations allow corporate credit card issuers to charge fees directly to their employees.

Why do these credit card fees exist?

This practice started with only good intentions. But as we all know, that’s exactly what the road to hell is paved with.

When companies first started issuing corporate cards to their employees, there was one major hurdle: getting employees to submit timely expense reports. When employees use personal cards for work expenses and need to get reimbursed, they’re more motivated to get those expense reports in quickly. When they use corporate cards and their own money isn’t on the line, turning in those expense reports becomes less of a priority.

Corporate card issuers saw this issue and offered a solution: adding a fee that employees have to pay out of their own pocket if an expense report is not processed on time. The idea is devilishly brilliant. Corporate card issuers like American Express would increase fee revenue. And employers would reduce the number of late expense reports and improve compliance. It seemed like a win-win.

But there’s one big loser in this arrangement—employees. A late or forgotten expense report, or even worse, a delay in processing an expense report by the employer, results in a $35 (or more) fee that the employee is responsible for, which can’t be expensed.

It gets worse, though. Because corporate credit cards usually don’t provide a mailed or emailed statement to the employee each month, this fee can go unnoticed, resulting in additional fees, interest charges, and even a ding on the employee’s credit score.

I’ve seen this happen. At a prior company, one of my employees had an expense report get stuck in a finance queue, and through no fault of her own, was assessed a $35 fee from the credit card company. There was nothing I could do. Because of our expense policy, I couldn’t allow her to expense this charge even though it was the company’s fault.

I heard one horror story where the first $35 fee went unnoticed, and subsequent late fees and interest charges cascaded into a $1,000+ bill. The employee quit her job trying to get out of the charges and ended up getting sent to collections. That credit card company extracted their pound of flesh.

We talk about this “carrot and stick” approach in our Ultimate Guide to Corporate Cards. It worked up to a point. Employers hold expense reports over the heads of employees with the threat of fees and non-reimbursement.

Your employees pay enough fees in their personal lives—they shouldn’t be subject to fines and fees at work. Employees who use a corporate card for procurement or business travel shouldn’t carry the burden of worrying that their expense report won’t be approved in time and that they’ll be charged a late fee.

There’s a better way

Center uses a different model that solves the problem of late expense reports without fining employees. Because Center is a software-enabled corporate card, managers and the finance team can see every transaction as it occurs, whether the expense has been submitted or not.

Employees still need to submit expenses, and you can require a receipt or other details like job number or project. But finance has full visibility into all expenses as they happen, even the unsubmitted ones. No more surprises, and no more waiting weeks (or months) for an expense report to be filed.

Because of the card-software connection, the finance team sees up-to-the-minute company expenses. Employees can submit expenses on the go from their mobile device. When they make a purchase, they get an immediate notification on their phone. It’s simple to snap a picture of the receipt and enter any details like job number or client. They can toss the receipt in the trash and never have to revisit that expense again.

We call this the “trust but verify” model. Employees are empowered with their corporate cards to buy and travel according to what the business needs without the looming threat of fees for delayed expense reports. It’s a true win-win: Employees can do what they need to do without worrying about fees, and finance has the controls and visibility they need to make sure everything is in line with the policy.

Want to see “trust but verify” in action? Sign up for a personalized demo of CenterCard and Center Expense.

Photo Credit: Sharon McCutcheon