P-Cards are payment cards that allow your employees to make purchases themselves without asking your organization to approve every purchase up front. These cards are also known as procurement cards and purchasing cards. Using these cards reduces your operating expenses because you can review all of your employees’ purchases when you receive the statement instead of authorizing each individual purchase request. This reduces the workload of the manager who’s monitoring employee spending. Here’s some more information about how P-Cards work.
P-Cards Have Spending Limits
A purchasing card helps you control your employees’ spending because it limits spending to a maximum amount each month. For example, the University of North Dakota allows an employee with a P-Card to charge a maximum of $9,999 to the card each month. The organization sets the spending limit for the purchasing card, so it can be lower than the maximum spending limit set by the bank for that card.
The University of North Dakota also allows employees with these cards to spend up to $9,999 on an individual transaction, but an organization can set a lower limit on individual purchases. The University of Illinois places its P-Cards into three tiers and the spending limit for the top tier is $15,000. But the university has also created a separate spending limit for individual purchases, so an employee can only spend $4,999 in a single transaction even though the card might still have more credit available.
Purchasing Card Users Need Training
Universities provide purchasing cards to their staff members, but they typically require a staff member to enroll in a training program before they’re allowed to use one of these cards. The staff member might have to take an online quiz and provide the right answers to the quiz questions before receiving their procurement card. Even if your employee already has a personal payment card, procurement cards are business payment cards so it’s necessary for the employee to know the business’ rules for using these cards. For example, a personal credit card might allow you to take out a cash advance but P-Cards don’t allow you to do this.
When an employee receives a P-Card, they’re responsible for any purchases made on that card. If they make an unapproved purchase, they will have to reimburse the company for that purchase. And in some cases, an employee could get in legal trouble for fraud for making an unauthorized purchase. Banks monitor purchases with their payment cards and if they detect potential fraud, they can notify you that an employee may have made a fraudulent transaction.
P-Cards Can Be Debit or Credit Cards
When a university sets up a P-Card program, this frequently means that the university’s banking partner sends out credit cards to the employees in the program. But procurement cards can be debit cards as well. Fintechs, financial software startups, often provide prepaid debit cards to their customers. These startups are trying to compete with the banks that issue corporate credit cards. When these startups discuss P-Cards they’re often referring to their prepaid debit cards. So a P-Card can be either a credit card or a debit card.
Either way, the actual company that issues the P-Card is a bank that has a license to issue payment cards. For example, the University of North Dakota gives its employees credit cards from JP Morgan Chase. If your company is using a P-Card issued by a fintech, then the issuer for that card is typically the fintech’s banking partner. This banking partner may allow the fintech to provide debit cards to its account holders but not credit cards.
Because P-Cards are payment cards, a P-Card will usually be either a Mastercard or a VISA card in the United States because these are the two largest payment networks. American Express also offers corporate credit cards, though, and its corporate credit card program also comes with its own spend management app so these cards could be used like P-Cards. The Chinese payment network UnionPay also offers P-Cards to international businesses.
Differences From Corporate Credit Cards
A P-Card is similar to a corporate credit (or debit) card that allows you to set up additional spending limits. If you give your employee a credit card, they can use it to make any transaction the bank will allow until they exceed the credit limit on that card. P-Cards allow you to establish additional spending controls, such as prohibiting purchases from certain merchants or limiting spending in certain categories. You can also use virtual P-Cards to make online purchases.
Like corporate credit cards, P-Cards often come with perks such as cash-back rewards on purchases and airline miles. Many people pick credit cards based on the reward programs they offer, so it’s worth considering P-Card reward programs as well. Fintechs that offer P-Card programs to businesses may still offer cash-back rewards and other perks even if their programs use debit cards.
As PNC Bank explains, these rewards provide an incentive for a business to switch from checks to purchasing cards. Your business doesn’t receive rewards if it uses checks to pay for purchases. It’s also easier to track your expenses if you’re using purchasing cards because they come with software that records each transaction.
Conclusion
P-Cards, or purchasing cards, reduce your spending on internal controls. They come with built-in spend control features that ensure that employees aren’t making unauthorized purchases, so they’re less risky than corporate credit cards. In other ways, these cards are very similar to corporate credit cards. So if you’re considering purchasing cards for your company, it’s worth considering other program benefits such as cash-back rewards and perks. You might also want to encourage your employees to use purchasing cards instead of other payment methods because of these benefits.