Employees could get stuck with business credit card debt

Many employees across the country have credit cards in their name that were issued by their employers to cover business-related expenses such rental cars and hotel rooms. But they may not be aware that they could end up stuck with the debt on those accounts if their employer can no longer pay the bills.

About 35 percent of all business-issued credit cards have agreements in which the card’s carrier can be held responsible for any debt on the account, ABC News recently reported. The companies that are most likely to issue a credit card with these agreements are the largest ones, including many Fortune 500 firms.

The report said many employees are unaware that they have entered into such an agreement when taking a business-issued credit card. When a consumer’s company goes under, they are often shocked to learn that they owe thousands in delinquent credit card debt their former employer couldn’t pay.

Because consumers are often unaware of these arrangements, that debt can go months without being paid, and in addition to owing all the money, they may also find their credit score has taken a severe hit. The report said some legal websites have seen many questions about corporate card liability since the recession hit.

ABC News said warning signs can show up in the application process, where employees may be asked to give their personal financial information, most typically their name and Social Security number. If that information is requested, then it’s likely they are entering into such an arrangement. Other indicators include a corporate account which shows up on their personal credit report, and if they are required to pay the bill and then get reimbursed.

Consumers should be wary of these agreements, since many have enough trouble with their finances even before being saddled with thousands in additional credit card debt. If an employer is going out of business, the report recommends that consumers should urge them to negotiate some sort of debt settlement. This way, an employee won’t be stuck with the account on their credit report.

Consumers who already have a business-issued credit card and are worried that this may happen to them should ask their employer for a copy of the agreement and check whether there is individual or joint liability on the account.