Mileage Reimbursement vs. Fuel Cards: Which is Right for Your Business?

Comparing reimbursement methods: A look at the pros and cons

Cost reduction

Fuel cards:

• Pros: Charges are easy to track and review, potential volume discounts at partner stations
• Cons: Administrative fees, potential for unauthorized purchases, there may be limited use for to participating locations

You’ll be able to spot suspicious charges, but the administrative burden of investigating the issue and communicating with the driver can be a hassle.

Because the card is in the drivers' hands you’ll also have limited control over initial charges — and be at the mercy of fuel prices drivers encounter on the road. All of this could lead to inconsistent expenses.

Mileage reimbursement:

• Pros: Much more predictable per-mile costs, no card fees
• Cons: Potential for over-reimbursement if not properly tracked

If your mileage is tracked accurately, you’ll only end up paying what you owe. And while reimbursement amounts will vary, you’ll be protected from fluctuating costs of fuel.

Ease of Use

Fuel Cards:

• Pros: Simple for drivers to use, automatic transaction recording, real-time spending controls
• Cons: Requires card management, potential for lost or stolen cards, limited merchant acceptance

Cards are convenient for drivers, but you’ll still need to invest time in reviewing balance sheets and reconciling expenses with routes.

Mileage Reimbursement:

• Pros: No physical cards to manage, flexible for various business travel needs
• Cons: Requires accurate mileage tracking, potential disputes over business vs. personal miles

Your drivers would need to track not only mileage, but also note down addresses, dates, and purpose of visit — which can be burdensome. Luckily, automatic mileage tracking and auto-generated reports can make the process fairly effortless.

Compliance

Fuel Cards:

• Pros: Easy to access transaction records
• Cons: Potential for non-business related purchases, which may have repercussions during an audit

Credit card statements are great for documenting expenses and can be requested during audits, but don’t carry a tax benefit themselves.

Mileage Reimbursement:

• Pros: IRS-approved standard rates ensure compliance, tax-free reimbursements for employees, clear documentation requirements
• Cons: Requires detailed mileage logs, potential audit scrutiny if tracking is inadequate

If the reimbursement rate is below or at the standard level, they’re tax free. That means more income for your employees and less paperwork for you. However, mileage logs must be detailed and include everything from complete addresses to the purpose of each trip.

Thankfully, tracking all of these details and adding them into a spreadsheet is no longer a manual task, which has the benefit of improving accuracy. An automatic mileage tracker and reporting platform can both track and generate reports for you.

‍Liability

Fuel Cards:

• Pros: Company maintains direct control over spending, immediate notification of unusual activity
• Cons: Liability for unauthorized charges, potential security breaches, responsibility for card misuse

Handing over a credit card to an employee requires a certain amount of trust. The bigger your driver team, the higher your liability risk for lost or misused cards.

Mileage Reimbursement:

• Pros: Limited liability exposure, employees responsible for their own vehicles, reduced financial risk
• Cons: Potential disputes over mileage accuracy, reliance on employee honesty in reporting

Cents-per-mile reimbursement relies on employee reporting too, but inaccuracies and over-reimbursements are somewhat easier to track and remedy than a lost or stolen card, or an unauthorized charge.

Employees need to prove that the drive they’re expensing was for business — and when these are tracked automatically with addresses and mapped routes — verifying which reimbursements are eligible becomes straightforward.

How to choose the right option for your business

The decision between fuel cards and mileage reimbursement often comes down to two key factors: your level of comfort with driver card usage and the tax benefits available to your employees.

Consider fuel cards if:

• You have high trust in your drivers and clear usage policies
• Your drivers primarily use company vehicles
• You want direct control over fuel spending and vendor relationships
• Your business benefits from detailed expense categorization

Consider mileage reimbursement if:

• Your drivers primarily use personal vehicles
• You want to provide tax-free benefits to employees
• You prefer predictable, standardized costs
• You want to minimize administrative overhead and liability

The tax benefits of standard mileage rates can be particularly attractive to employees, as reimbursements at or below the IRS rate are not considered taxable income. This creates a win-win scenario where employees receive full compensation for vehicle use without tax consequences, while businesses enjoy simplified expense management.

Effortless mileage reimbursements with MileIQ

MileIQ transforms mileage reimbursement from a tedious administrative task into an automated, accurate process. Features like intelligent classification helps keep personal drives separate from business travel, ensuring you only pay drivers for legitimate business miles.

This alone can result in significant cost savings by eliminating over-reimbursements that commonly occur with manual tracking systems.

For small business owners, having a centralized reporting platform eliminates the back-and-forth typically associated with mileage claims while ensuring accuracy and compliance.

FAQs

What are fuel cards?

Fuel cards are credit cards which are given to employees. Drivers can use them to purchase fuel or pay for other vehicle-related expenses (like parking and toll fees). The company is responsible for paying the balance on fuel cards.

What are mileage reimbursements?

Mileage reimbursements compensate employees per mile driven. The IRS sets the rates each year, and as long as the amount paid is below the allowed rate, the reimbursements are tax-free. Employees can use a mileage tracking app to record drives automatically and submit reports for reimbursement.

Which expense tracking method is right for me?

Mileage reimbursement is widely used to compensate employees driving personal vehicles for work — because only business trips can be reported and the drives are reviewed prior to reimbursement, many employers consider this a more financially sound option.

Meanwhile, fuel cards are relatively popular for fleet vehicles, when an employee is using a company vehicle for their job.