Boss’s Credit Card: Should You Be An Authorized User?

Because of all of your duties as a nanny, the list of expenses you have to pay for is a mile long. Changing the baby, grocery shopping, and gas in the car, all require supplies. How you pay for those supplies is something you should address with your employer at the beginning of your employment.

An increasingly popular option is for employers to add the employee as an authorized user on their credit card. Here are some pros and cons to consider:   

Credit Reports: Authorized User or Joint Account?

Credit ratings have never been as important as they are now. If you are a nanny and an authorized user on your boss’s credit card, it can be good for you. The account will be automatically added to your credit report and sometimes even backdated to the day the account was opened. This raises your credit limit and affects your credit score.

On the other hand, if your employer isn’t so great on paying his bills, that will go on your credit report, too. Any late or missed payments are reported for all users to the credit bureaus, which will have a negative impact on your credit score. In other words, every bit of credit history, good or bad on that particular card, is reported to the credit bureaus.

An employer is responsible for all charges on a credit card. If a nanny is added to an account as an authorized user and decides one day to buy the kids $5,000 worth of toys, the employer is responsible for the charges.

On the other hand, if the nanny is added as a joint account holder on the account, she is responsible for the charges just as much as the employer. If a payment is missed, it goes on both the employer’s and nanny’s credit reports. Read more about the difference between being an authorized user versus a joint account holder here.

Another problem worth noting is your credit rating after identity theft; it is one of the leading cyber crimes in the world. If your employer’s bank account is hacked, his identity stolen and his credit destroyed because of it, yours is, too.

Charge Card or Credit Card?

There is a difference between a charge card and a credit card. A charge card is one that has no limit. You can charge as much as you want to it, but you have to pay the entire balance when it’s due and on time. Sometimes it behooves an employee to use a charge card; the high balance doesn’t impact a credit score because you have to pay it all off the next month.

Business or Personal Credit Cards?

If a nanny uses a business credit card, all expenses are recorded as such.American Express has a business card available, for example. If your employer uses this, the credit history is not submitted to personal credit reports; the balance is due every month, so there is no monthly credit limit on the credit card reported. Since American Express is also a charge card, which would make it attractive as a way to pay for expenses.

An employer can also issue a credit card in your name and link it to his account with you as an employee. This gives the employer a way to track expenses that you pay for plus keep track of his own charges on one statement.

Your Money or Hers?

There is, of course, the age-old way of paying for things on the job: using your own money and submitting a statement for reimbursement to your employer.

If you are going to use your own money, then you must keep track of each and every expenditure. You should agree on a spending limit ahead of time with your employer.

One potential problem: if you don’t have money to cover expenses, how will you pay for them? Petty cash? Going to your employer “this one time”? Make sure you cover this provision with your employer, as well. Another thing to think about is the reimbursement guidelines for taxes. All reimbursement — paid or not — needs to be addressed on your tax return, and there are differences for every tax bracket .

Paying for the cost of taking care of children is part of the job as a nanny. How you do it is up to you and your employer. Review the options at length with your boss before you start employment. Go over various scenarios and what-ifs. To enter into any kind of financial agreement between an employer and employee, a certain level of trust is necessary.