5 sneaky downsides of using a company credit card

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There's nothing like having a shiny company credit card to make you feel like a high roller. Entertaining clients? No problem. Taking a business trip to Chicago? You'll book that flight. Attending an annual conference? The registration fee is covered.

But there are some pesky downsides to flashing company plastic, especially when it comes to managing your personal credit and financial health. Here's what to know about using the company credit card.

[See: 7 Companies With Perks That Will Totally Make You Jealous.]

A side note: Many of these downsides depend on the type of card and the arrangement with your employer. "Generally speaking, with a corporate card, most of the responsibility with the balances belongs with the company," says Matt Schulz, senior industry analyst for CreditCards.com. "That's opposed to small-business cards, where it can sometimes be more jointly held with the cardholder." So, be sure to ask questions and read the fine print before you take on the card.

1. It may ding your credit. Some company cards are tied to your credit, which can be risky. (If your boss asks for permission to run your information through a check before handing off the card, that's indication that your credit is attached in some way.)

You may know this from holding personal debt: The process of applying for, and taking on, a new credit card can result in a temporary credit hit. For one thing, it lowers the average age of your accounts, which can reduce your score. "Once it shows up on your personal credit report, it is treated no differently than a true personal credit card in your name," says John Ulzheimer, a national credit expert.

While this dip should eventually right itself, it can spell trouble if you're simultaneously in the process of negotiating some other kind of personal debt. That means if you're looking into buying a new car or taking on a mortgage, consider doing it before you apply or waiting until your credit restrengthens.

Another issue can arise if you're constantly maxing out your company card for pricey business trips and decadent meals. Having a high debt-to-limit ratio, called a credit utilization ratio, hurts your credit. So, if work is having you buy $3,000 steak dinners for clients or jetting off to Portugal every month for a weeklong stay, you may find that a jointly held card starts to eat away at your score.

Even more worrying: If your credit's not strong, there's a chance you could be declined when applying for the card.

[Read: How to Rebuild Your Credibility After Messing Up at Work.]

2. You may be on the hook for late or missed payments. With some arrangements, a company has the credit card bill sent to itself, and you have no responsibility to repay it. But other arrangements may require you to handle the payments – and absorb any charges for missed or late payments.

That's especially risky when you have the whole company-mandated rigmarole – itemizing receipts, filling out paperwork and filing your expense report – potentially delaying your reimbursement check from human resources. "You are often at the whim of how quickly your expenses are paid by your employer," Ulzheimer says.

3. They don't have the same protections. The Credit CARD Act of 2009, which is like a Bill of Rights for credit card holders, offers certain protections to card users. Those include making rates and fees more transparent and predictable. But those lovely protections don't apply to corporate cards, Schulz says.

[See: Be Thankful for These 6 Workplace Rights.]

4. You might not get the rewards. Again, depending on the card and your employer, your credit card may not offer rewards – or your company may get to keep them. In contrast, if you are using a personal card for travel expenses, you still get to choose the rewards – cash back, airline miles or something else – and use them as you wish. "The advantage of going the personal route is that you get to pick the card, so you can maximize the rewards," says Gerri Detweiler, head of market education for Nav, which offers free credit scores to small business owners.

5. You need to protect yourself. When it comes to company credit cards, it's tough to tell your boss that you don't want one. But, experts warn, you have to draw a line when it comes to risking your financial situation for your company's convenience. "Don't do anything that could screw up your personal financial journey, just because your company makes you have a personal corporate credit card," Ulzheimer says.

"You may not have a choice about getting a corporate card," Schulz says, "but at the minimum, you can be informed."Related: 15 things you stop wasting your money on

15 things you can stop wasting your money on
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5 sneaky downsides of using a company credit card

1. Cable TV

With the advent of Hulu, Netflix, Amazon Instant Video, and Apple TV, there's hardly a reason to splurge on a fancy DVR system or even basic cable — so long as you're willing to be patient.

Most shows are added at least 24-hours after airing and some networks won't give them up until eight days.

See some great alternatives to cable TV here.

Via Business Insider

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2. Bank fees

Banks love to slap you with fees at the drop of a hat, but that doesn't mean you've got to put up with it.

"Consider going with a credit union, which are better than banks in many ways, to avoid some of these fees," says Andrew Schrage, founder of MoneyCrashers.com.

"If you travel abroad often, make sure you use credit cards without foreign transaction fees, otherwise you'll be paying an extra 3% to 5% on all your purchases."

Via Business Insider

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3. Extended warranties

Retailers push hard to sell you extended warranties — and conveniently pump up their sales figures at the same time.

Don't do it, Schrage warns.

"The only instance I'd recommend a warranty is in the case of a laptop. Otherwise, the warranties themselves can often cost as much as simply buying a used or new replacement for your item, or repairing it," he adds.

Via Business Insider

Photo Credit: Getty

4. The roof over your head

If you're blowing most of your income on a loft in Midtown, you're making a big mistake, says Jeremy Gregg, executive director of the PLAN Fund.

His organization provides loans to low-income entrepreneurs, who Gregg says he often sees spend more than half their income on rent and utilities.

The U.S. Department of Housing & Urban Development recommends spending less than one-third of your income on housing.

Via Business Insider

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5. Unnecessary smartphone data

"Many of us (including me) pick a cell phone plan, then never check to see if it's the right one for us based on our usage," writes author of "I Will Teach You To Be Rich," Ramit Sethi. "Because the average cell phone bill is about $50, that's $600 per year of money you can optimize."

When buying a new cell phone, Sethi likes to pay a little bit more upfront by choosing the unlimited data and text messaging plan. He then sets a three-month check-in on his calendar, and analyzes his spending patterns after a few months to see where he can cut back.

You can use this method for any usage-based services, he says.

Via Business Insider

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6. Online shipping

Nearly all retailers offer some sort of option that gets your purchases to your doorstep without additional fees.

Zappos and L.L. Bean are among the rarest breed of businesses offering free shipping on every single purchase, but most companies will demand a minimum purchase.

To help track down deals on shipping, use Freeshipping.org. The site stores information on expiration dates, tells you much to spend to qualify, and lets you search by store name or product.

Otherwise, check out CouponSherpa or Retailmenot, which offer discount codes for free shipping.

Via Business Insider

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7. Cheap art

Environmental designer Pablo Solomon says picking up knockoff prints and other art is a great way to blow cash for no good reason.

"Nothing sends me through the roof like the art sold on cruise ships and at resorts," Solomon says. "(They're) basically glorified posters being sold as originals."

The best way to score deals on art is to track up and comers, he says. You can nab their art early on and laugh your way to the bank after they've made it big.

Via Business Insider

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8. Fast food

You're only hurting yourself (and your wallet) if you're feeding yourself out of the bodega around the corner from your home or office.

"I am shocked at how many people live paycheck-to-paycheck and yet routinely spend $10 per day on fast food and convenience store food," Gregg says.

If you're looking for an alternative to brown-bagging it, check out how to shop for the healthiest foods at the grocery store for the least amount of money, and start preparing your own food.

Via Business Insider

Photo Credit: Getty

9. Piecemeal insurance

Buying overpriced insurance for things like accidental death and diseases is an easy way to blow your funds.

"Instead of buying piecemeal insurance policies, get good term life insurance and disability insurance," says Sally Herigstad, a certified public accountant and Creditcard.com columnist.

Take a look at the types of insurance you should buy at every age.

Via Business Insider

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10. Lousy gifts

Personal finance expert Dani Johnson suggests you think twice before rushing out to buy Dad another tie this Christmas.

"You should make a pact with your friends and family to give back instead," Johnson says. "Pool a percentage of money you were going to spend on gifts and give a secret blessing to somebody who is truly in need."

If you want to buy a great gift without completely breaking the bank, check out these holiday gift ideas for under $50.

Via Business Insider

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11. Weight loss traps

Weight loss pills and supplements marketed as miracles for overweight couch potatoes are most likely traps.

"Not only are there enough pills and potions that you could start a new one each week, but the negative effects on your health outweighs the money you will waste," says nutritionist Rania Batayneh.

"This is a billion dollar industry and the truth is that a lean body does not come in a pill," Batayneh says.

Via Business Insider

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12. Lottery tickets

"Sure, you can (buy a lottery ticket) every once in a while just for fun, but never make a lottery purchase with any real expectation of winning," Schrage warns.

"The odds are significantly stacked against you, and why waste your hard-earned money on lottery tickets when you could be saving for retirement or treating yourself to a nice meal?"

Via Business Insider

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13. Brand new cars

"People get bored with cars quickly. They always want a new car and so they're always dealing with a car payment," says certified financial planner Michael Egan. "But it's a hugely depreciating asset. You don't want to be putting a lot of money into something that's going to be worth nothing after a certain number of years."

Look for used car options, which could save you a substantial amount of money. Check out Kelley Blue Book to get an idea of how much you should pay for a used car.

Another option is leasing a car. You can determine whether or not this is a good option for you by following this flow chart.

Via Business Insider

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14. Subscriptions

Subscriptions — to magazines, newspapers, and the gym — can add up, and oftentimes, we don't use them as much as we had originally planned.

Sethi recommends implementing what he calls the 'à la carte' method, which takes advantage of psychology to cut our costs.

"Cancel all the discretionary subscriptions you can: your magazines, TiVo, cable — even your gym," Sethi explains in "I Will Teach You To Be Rich." "Then, buy what you need à la carte. Instead of paying for a ton of channels you never watch on cable, buy only the episodes you watch for $1.99 each off iTunes. Buy a day pass for the gym each time you go."

It works for three reasons, Sethi writes: You're likely overpaying already, you're forced to be conscious about your spending, and you value what you pay for.

Via Business Insider

Photo Credit: Getty

15. A morning latte

Author of "The Automatic Millionaire," David Bach, coined the term, "The Latte Factor," which basically says that if you ditch your $4 latte every morning, you'd have quite a bit of money to contribute towards savings — about $30 a week, or $120 a month). Over the course of a few decades, that money could grow substantially.

Rather, invest in a nice coffee maker, even if the price tag is a bit steep. Oftentimes, spending more on high quality items can help you save in the long run.

It can seem counterintuitive to make purchases to save, but that's what some of the most successful money-savers do. They're not just buying things, they're investing in things — tools and services — that will eventually save them money over time.

Via Business Insider

Photo Credit: Getty


Copyright 2015 U.S. News & World Report

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