Yesterday, The Wall Street Journal reported that the Trump administration had lowered single purchase limits on U.S. government corporate cards to one dollar for most government agencies, effectively rendering these cards useless.
These actions were taken by the Elon Musk-run Department of Government Efficiency (DOGE) as part of an overall effort to improve government efficiency and reduce government spending.
As someone who made his first billion dollars in the payments industry, Musk is an unlikely person to be at the head of this initiative. One might expect him to have a more subtle understanding of the benefits and detriments of different payment instruments, particularly their ability to automate complicated, potentially inefficient processes.
Cards Reduce Procurement Costs
A key benefit from corporate cards, particularly purchasing cards, is their ability to reduce the administrative costs incurred by large organizations when they buy things. They do this by replacing a labor-intensive req-to-check process with post-purchase review and approval, backed by issuer insurances against fraudulent purchases. By the most recent estimate from the U.S. Government Accountability Office (U.S. GAO), paying with a card saves the government around $70 per transaction in administrative costs versus traditional procurement processes. GAO estimates the total savings at around $1.7 billion annually.
For perspective, last year just under $40 billion worth of federal government payments were made using the GSA’s SmartPay program (the umbrella authority for all U.S. Government Corporate Cards). That’s roughly 0.6% of the 2024 federal budget.
While the WSJ notes that exceptions were made for employees making purchase related to emergencies and disaster relief, no additional carveouts were noted. This may be cause for concern, given how these cards are used. In 2024 just two departments accounted for three quarters of all corporate card spend: the Department of Veteran’s Affairs and the Defense Department, two areas of government where it is crucial to have ready access to the tools needed to fulfill the department’s mission.
Costly Workarounds
Already, government employees are trying to figure out workarounds to maintain service levels and delivery times predicated on the ability to forego requisitions and purchase orders with cards. Implications for traveling government employees are obvious (IRS auditors are having to figure out how to pay for travel to on-site audits), but issues of non-travel purchasing may cause even greater problems.
If transactions below a certain threshold must be made using cards, making such low value transactions via other means may not just be hard—it may be impossible. Often procurement software is hard coded to re-route purchase orders to cards below a certain dollar threshold, so that if it can’t be made with a card, it can’t be made at all.
Rather than streamlining government spending, this across-the-board move to halt government expenditures may wind up driving up administrative costs by delaying critical purchases and forcing employees to develop inefficient workarounds. Perhaps more ironic still, a man who helped revolutionize payments by moving them online has effectively crippled one of the government’s most efficient tools for payment.
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