posted July 14, 2016

Credit Card Procedures to Reduce Risk

by Christopher Rogers, Staff Associate II

When used appropriately, credit cards can be a valuable resource to any organization, particularly in times of an emergency, booking travel arrangements, or offering a convenient way to purchase products and services for your organization. However, credit cards also expose your organization to a higher level of risk, especially fraud, waste, and abuse. A few documented policies and procedures can help to minimize your risk and ensure credit cards remain beneficial to your organization.


Limit Availability. Limiting the number of people who have access to your credit cards can help reduce your risk. Only issue cards to employees who have a clear fiduciary responsibility to your organization. This will allow you better control over which employees have access to your credit cards and the reason for that access. It is also important to have each card holder sign a written agreement where the employee accepts responsibility for any unauthorized purchases.

Monitor Usage. Another way to reduce your risk is to monitor the usage of your credit cards. Set spending limits for employee purchases and make sure to have a process in place to approve expenditures prior to purchases being made. Monitor the credit card activity to ensure employees are not exceeding their authorized limit or making purchases without prior approval.

Review Statements Regularly. One of the best methods of reducing your risk is to review credit card statements promptly and regularly. Reviewing your statements regularly will not only help you identify any errors or discrepancies on your statements, but it will also deter people from misusing your organization’s credit cards. Additionally, if an employee does make an unauthorized purchase, you will be able to identify the problem immediately and reduce the overall potential damage your organization.

Here are a few more additional tips to keep in mind when using credit cards in your organization:

  • Pay your credit cards timely each month. This will help to avoid late fees. Late payment fees are costly and some credit card companies may even increase your interest rate if you begin to have overdue payments.
  • Pay off the balance each month in full. This will help to avoid finance charges. Don’t charge more than you can pay off each month.
  • Never allow cash advances. Not only are cash advances at higher risk of misuse and abuse, but they also cost you more in finance charges. Not to mention using cash advances often times bypasses and violates many organization’s purchasing policies. It is a better practice to just plan ahead for expenditures and avoid them all together.

The content of these pages is for general information purposes only and does not constitute advice. Heinfeld, Meech & Co., P.C. tries to provide content that is true and accurate as of the date of writing; however, we give no assurance or warranty regarding the accuracy, timeliness, or applicability of any of the contents.