Credit Cards and Expense Accounts

June 26, 2009

In my previous post I talked about the “float” on credit cards going away in the near future. Not only will this affect the way individuals use their cards but the bigger question I have is how are businesses going to adapt. Many employees use company credit cards or individual credit cards for business expenses that are then paid for by the business when the next statement comes.

In the scenario that the credit card companies begin charging interest from Day 1, who is going to pay that interest? As a producer, I’m not willing to pay interest because I’m waiting on a reimbursement check from my company and I know my company isn’t going to pay the interest either. The only other option is for the business to give me a company debit card or for me to charge business expenses on my own debit card. Although both of these options avoid interest payments, they require my employer or me to have significantly more working capital on hand at any time. In theory, the business or I would need to have 30 additional days of working capital on hand.

It will be very interesting to see what changes businesses will make in the expense reimbursement process if this change becomes widespread.

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Are credit cards going away?

June 23, 2009

Because of recent regulation that caps the fees credit card companies can charge riskier customers, there has been talk that credit card companies are going to start charging customers interest from the time a purchase is made. According to the New York Times, “banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.” To me, it looks like the days of charging expenses on a card, paying it off in 30 days and reaping the cash rewards or airline miles may be over sooner rather than later.

Click here to read the entire article.