Purchase Cards – sometimes also known as P-Cards – are credit cards for use specifically by employees of government agencies, schools or individual corporations. The difference between purchase cards and traditional credit cards is that they must only be used at certain types of merchant locations, such as at a university bookstore or a police supply house. Purchase cards are usually issued by major banks, just like an acquiring or merchant bank does for regular credit cards. Instead of allowing the cardholder to purchase as they would with a traditional credit card, there is a discreet limit on the type of things that may be purchased, the amount and where the items or services are purchased. These limitations are usually set by the government body or school that allows for the program and use of cards in the first place. There is always an agency program coordinator and administrator in place at such agencies who is responsible for maintaining agency cardholder records, that includes monthly statements and purchase documentation.
Two codes are used to help track and control purchased with a purchase card. Merchant category codes are used to control whether or not cardholders can make purchases from particular types of merchants. Point of sale codes are those code entered by the merchant at the time of sale that can be used to enhance accounting data.
Typically, a new cardholder will need to interface with their business office to determine whether there is a genuine business need for the cardholder to have a purchase card. Once the need is justified and the applicant is approved they are given a card for specific use.
As a student, for example, a potential cardholder signs a Purchase Card Holder Agreement that expressly says it may only used for school purposes. Once approves, the cardholder is typically told what they can’t use the card for first, which includes but is not limited to personal purchases, such as travel to and from home, gifts and more; direct cash withdrawals; and purchases in which an allowance has already been provided.
Like regular credit cards, most purchase cards can be used in person, over the phone, online or by fax.
There are some cases in which a purchase card may be incorrectly used.
If a cardholder makes an accidental purchase on their card, they usually must contact their company or school your business office as soon as possible to arrange immediate reimbursement of the incorrect expense. This reimbursement can usually be done with a personal check or personal credit card. Since it is the intention of such cards systems to be carefully monitored, spending receipts must be well kept. In the case of misspending, original receipts and reimbursement receipts usually accompany purchase card statement for processing. If an original purchase receipt is missing, cardholders are required to complete a missing receipt and submit with a statement. When the amount is substantial, an organizational business office will usually offer suggestion on how to obtain copies of the receipt. Of course, if a card is used by someone else without authorization, then the business office and the issuing bank must be notified right away to track who may have used the card, cancel the card and reissue a new card to the original cardholder. Like traditional credit cards, several security measures exist to prevent common fraud, such as illegal online use, with AVS codes and other security codes that verity cardholder account numbers and addresses.
Cardholders typically have to clear transactions themselves or pass the process onto a review officer, which can be undertaken daily, weekly or monthly. At a minimum, this should be done at least monthly, although it is recommended that large volume transactions be done so every week.
If a cardholder is leaving the area, won’t be using the card for a prolonged period or is leaving the agency that issued the card, then the business services office must be notified right away. When on extended leave, limits are usually reduced to nothing to prevent non-cardholder use. Of course when someone leave the company that issued he card, the card is usually returned and the account closed.