Preventing Employee Credit Card Fraud
Published on by Chaleise Fleming in Client Accounting & Advisory
Issuing company credit cards to employees can streamline business operations, but it also introduces risk. Without proper oversight, employee credit card misuse can lead to significant financial loss and internal control breakdowns.
Unlike consumer cards, business credit cards generally are not protected by the Truth in Lending Act, and the Fair Credit Billing Act allows only 60 days to dispute unauthorized charges. After that, recovering funds becomes difficult, making strong internal controls essential.
Issuing company cards
The most effective way to prevent fraud is to avoid issuing corporate cards altogether. Some businesses require employees to use personal cards for business expenses and reimburse them later. This adds an extra step but allows for tighter control and review of spending. However, when business credit cards are necessary, companies should put formal policies and monitoring processes in place to mitigate risk.
Establish clear policies and train employees
Only employees with frequent, legitimate business expenses should receive a card. A written policy should outline allowable charges, documentation requirements, and consequences for misuse. Employees should acknowledge the policy in writing and revisit it annually. Ongoing training ensures cardholders stay informed and understand their responsibilities. This also reinforces a companywide culture of financial accountability.
Strengthen controls and oversight
Set transaction limits and restrict spending categories to reduce misuse. Require receipts and clear documentation for all purchases. Use automated alerts to detect unusual activity and review monthly statements through a dual-approval process. Consistent reconciliation is key. Business credit cards should be reviewed with the same diligence as checking accounts.
Take proactive security measures
Before issuing a card, conduct background checks. Immediately cancel cards when employees leave the company, and suspend access at the first sign of suspicious activity. Enforcement matters: misuse should result in clear, consistent consequences ranging from warnings and repayment to termination or legal action.
Equally important is consistent enforcement of company policy. Consequences for misuse should be clearly outlined and enforced without exception. Depending on the severity of the violation, disciplinary actions may range from written warnings and repayment of unauthorized charges to termination or legal action. A policy without enforcement is unlikely to be effective, and inconsistency sends the wrong message to the broader team.
Accountability starts at the top
Fraud prevention goes beyond systems. It requires leadership to set the tone for financial responsibility and ensure that transparency, integrity, and accountability are embedded into daily operations. Ongoing oversight, regular check-ins, and clear communication contribute to a culture where misuse is not tolerated and prevention is everyone’s responsibility.
As with any other financial account, business credit cards require routine review and thoughtful oversight. Assuming that policies are being followed is not enough. Risk management should be a deliberate and continuous process.
Next steps
Concerned about the risk of employee credit card misuse or wondering if your current policies offer enough protection? Contact us today to speak with one of our experienced advisors. We can walk you through a fraud risk checkup, assess your internal controls, and help strengthen your organization’s approach to fraud prevention. As always, we’re here to help.
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