Nearly all credit card issuers give primary account holders the ability to add other people to their accounts. This includes credit cards designed for small businesses. When you make employees authorized users, you are giving them your formal permission to use the account. They’ll receive cards imprinted with their names, and can use those cards to make charges.
There are many advantages to letting employees piggyback as authorized users on your business credit card, but there are some disadvantages as well. Here’s what you need to know.
Benefits of adding authorized users to a business credit card
As the primary business credit card owner, you can provide your employees with a credit card that is attached to your account. The number of people you can add depends on the card. Some don’t have a preset limit. Others do, but the number of users can be quite high. The American Express Blue Business Cash™ Card, for example, limits authorized users to 99 per account.
With business credit cards, authorized user cards are sometimes referred to as employee cards. However, because you notify the issuer that you want to connect them to your account, the people you add are authorized users. Account ownership never changes, so you are always responsible for the bill, no matter who made the charges. Unless you designate an authorized user as an account manager, they will not have any other access to your account except charging.
Adding employees to your business card as authorized users has many benefits, including:
Reduced purchasing tasks and reimbursement
As a small business owner, time is likely at a premium. When you give selected employees the ability to purchase things for the company, your plate is cleared so you can concentrate on other tasks.
Anything the authorized user buys with the card will be visible on your account statement. You can track their purchases, and pay the bill without the employee sending you an invoice for you to review, then having to reimburse them.
Employees travel more comfortably
When employees have a card with their name on it, they can book their own flights, hotels and car rental arrangements. Most issuers will extend full travel benefits to the user as well. Delta SkyMiles® Reserve Business American Express Card, for example, gives additional users the same complimentary access to the coveted Centurion Lounge that you enjoy at airports.
You and your employees earn rewards and benefits
When your employees pay for things with your account, they typically also get the benefits associated with the card. Among the best business credit cards, these perks can include travel insurance, purchase protection, extended warranties, car rental insurance and more.
You may also benefit from the charges your employees make. If you have your employees charge things for your business — from merchandise to travel — with their money or credit cards, for example, you do not earn the cash back, points or miles. Make them authorized users on your account, though, and the rewards they rack up are yours.
You can set charging limits
Your business credit card may come with an enormous credit limit, but you may not want your employees to have full access to it. Most credit card issuers allow owners to modify authorized users’ charging limits, such as Ink Business Unlimited® credit card, which allows you to set individual spending limits for each employee. This feature can protect you against exceptionally large debt, should the employee abuse their privileges.
Drawbacks of adding authorized users to a business credit card
Of course, there are potential problems with adding authorized users to a business card as well. The main downsides to consider are:
Many business credit cards will allow you to add employees as users for free. However, for cards with extravagant rewards programs, you may have to shell out high annual fees for additional users. The Business Platinum Card® from American Express, for example, not only costs $695 a year for your card, but the annual fee for each additional user will cost you $350. Review the benefits and perks to know if the cost makes sense.
More complicated account management
When you add additional users to an account, complications can arise. For instance, you may want to buy something very expensive with the card but your employee has already made recent transactions that prevent you from making the charge. To make sure problems like this don’t occur, you’ll either have to communicate with the user or check the available credit line.
Trust can be broken
Even if you set lower charging limits, your employee can charge up to that amount and leave you with the debt. You can try to collect from that person but the credit card issuer will turn to you for payment.
No bonus for authorized users on business credit cards
Some personal credit cards reward you for adding an authorized user to the account, but many business credit cards, such as the Ink Business Cash® Credit Card do not. If you’re hoping for that valuable bonus, read the offers carefully.
Credit scoring issues
Because the account is in your name, it will appear on your credit files and be factored into your credit scores. If the account is mismanaged due to problems associated with the authorized user, your credit will be negatively impacted. But that’s not all. The card will show up on your employee’s credit report, so if you have trouble making the payments or if the debt is too close to the credit limit, their credit can also be negatively affected.
How to add and remove authorized users
Adding and removing authorized users is usually fast and simple. The process is the same for a business credit card as it is for a personal credit card.
Begin with a conversation about your rules regarding account usage, and put them in writing. You may only want the employee to charge certain expenses, so make that clear before you begin the process of adding them as authorized users. Also inform them that the account will show up on their credit report.
To add an employee, log onto your account and look for where it says “add cardholder” or “request employee card.” If this option is not available online, call the company and make the request over the phone.
In either case, you will provide the person’s first and last name, mailing address, date of birth, and Social Security number. If the credit card allows you to set a lower credit limit for authorized users, you will see that option and can choose it. If there are any fees associated with adding the person to your account, those charges will be added to your bill.
After you have made the request, the issuer will send the card to the designated employee. That person will then activate the account and will be ready to charge.
You will probably want to end the card connection at some stage. The employee may have moved on or didn’t use the card according to your rules. Whatever the case, you can have them removed.
Some issuers will let you remove authorized users online via their website or with the mobile app, but all will allow you to do it over the phone. If you call, explain that you want to have the user removed from your account, To ensure the request is honored, you may want to send a letter about your request. Include the same information about the person you used to add them as an authorized user, the account’s details, and the date you made the call.
When the person is no longer associated with your card, the issuer will stop sending information about it to the credit reporting agencies.
The bottom line
It’s important to choose the right business card for your growing business. It’s also important to choose the right people to add as authorized users to your business credit card, so make sure they are responsible and trustworthy. As a small business owner, these shared arrangements can make your life easier, and are often a positive perk for your employees. If it doesn’t work out? No problem. Authorized users are never a permanent fixture on your accounts, unless you want them to be.