Credit card use in churches can be good, bad or just plain ugly

By Vonna Laue

Transactions are handled so differently now than in the past. Society has moved from coins to paper money, checks, and now electronic forms of payment such as credit cards or electronic funds transfers.

I remember not that many years ago when I barely used a credit card and wrote a check for everything. Now I keep a pad of checks for nearly two years and even pay my credit card electronically. I’m shocked when I encounter a business that doesn’t accept credit cards.

As people’s habits change, so will the processes in your church. You may review your bank statements online and there is likely more of a push for credit card purchases by your staff or vendors. There are two primary ways that credit card transactions occur for church expenses. First, an employee buys something for the church on a personal credit card and submits for reimbursement. This is a simple process and they should follow the reimbursement plan that is in place. The second would be the use of a corporate credit card.

A corporate credit card allows a church to have a credit card in the name and on the credit of the church. Multiple cards can be issued to staff and the statement reflects the purchases of each individual. As with any other decision, there are several factors to consider.

Positive factors

Perks: The church receives any benefits offered by the credit card company.

Helpful: Staff members with limited personal credit are able to make purchases whereas they may have difficulty if they were required to put larger amounts on their personal credit cards.

Efficient: Some companies allow for electronic downloading of information for better efficiency in your accounting department.

Limits: Different credit limits can be assigned to the cards which allow you to assign the card based on purchase or approval restrictions already in place for individuals.

Negative factors

Documentation: It can be difficult to obtain the necessary documentation (receipts, approvals, etc.) from cardholders. However, the church has their credit at risk and therefore is required to make timely payments. Obtaining the information after the payment has already been made can be a cumbersome process.

Costs: There can be costs associated with this arrangement such as annual fees, bank fees or “hidden” fees such as lower interest rates on accounts.

Carrying debt: Costs could include late fees and interest charges. It is typically far more costly to carry balances on credit cards than to obtain a line-of-credit or other form of short-term debt if cash flow is tight.

Lack of control: Individuals may use the cards to purchase things that aren’t necessary or approved, or they may just buy them at a time that is not appropriate for the church.

Personal charges: Personal items may be charged to an account which would require the proper identification and reimbursement of those amounts. It should only happen in the case of an emergency and should be quickly resolved.

Here are a few suggestions:

• Consider the cost of doing business this way
• Have a credit card policy in place for the church
• Have an agreement with the individual cardholders

A credit card policy would address issues such as, “Who is allowed to possess a corporate credit card?” It would note what was considered adequate documentation and the timeliness of when those items were to be received. A statement alone is not sufficient.

You should also require that the statement be reviewed by the cardholder to determine that all charges are appropriate and to code the expenses to the proper expense accounts. The policy would further discuss the expectation that the cards will be used for ministry purposes only and would define the consequences for non-compliance with any portion of the policy.

Have an agreement in place

An agreement with the individual cardholders would state the items included in the church’s credit card policy and require the individual to acknowledge and sign that they had read the policy and agree to comply with the guidelines. This will help if enforcement of policy guidelines ever becomes difficult.

Finally, the review process is very important. Credit card expenses should be reviewed and approved monthly just like employee expense reports. Approval should be made by a supervisor of the cardholder. This would include a member of the board reviewing the statements for the senior pastor (this could be done retroactively so that payments can be made promptly).

There is no need to run away from corporate credit cards. They can be useful in a ministry. The decision should be made like all others with care taken to make sure they enhance the operations of the church and comply with necessary procedures that are in place. Technology and electronic transactions are here to stay and will only grow in the future. Consider how you can use it to the church’s benefit and the benefit of those on staff.

Vonna Laue is a partner with Capin Crouse, Brea, CA, a CPA firm that serves the not-for-profit community. [capincrouse.com]