A corporate credit card can help a company manage expenses by helping control where a card is used or how much is spent. However, corporate cards offer certain benefits that small business cards don’t, but you must earn a certain amount of revenue to qualify.
For larger small businesses, getting a corporate card, like the ones big corporations issue to employees, often makes sense. Corporate cards offer features small business cards don’t.
But they’re generally available only to businesses with at least several million dollars in annual revenue.
What is a Corporate Credit Card?
A corporate credit card is a credit card that is issued to specific employees by their employer for business-related expenses. Companies issue corporate credit cards to employees so that they can pay during business trips without using their personal cash or credit cards.
Corporate credit card accounts are usually opened by businesses through:
A banking relationship
By negotiating directly with a card issuing company
Although they are normally issued in the employer’s name, they also bear the name of the cardholding employee. However, unlike a personal credit card, in case of non-payment, the employer can be held liable as well.
Some of the most popular corporate credit card issuing companies include American Express, J.P. Morgan Chase, Citibank, and Wells Fargo.
Pros and Cons of Corporate Cards
Less personal risk
Improved reporting and record-keeping
Ability to set limits
More robust customer service
Costs and fees
Employees lose opportunities for rewards
Must monitor employee spending: You need to set up a strict and clear company credit card policy and then monitor employee spending for any violations.
The cardholding employee is responsible for the payment of charges. He is also responsible for reporting those charges as business expenses to the employer for reimbursement.
The credit card issuer checks the employees’ personal credit score before issuing them this card. However, their personal credit score is unaffected by their corporate card usage.
Corporate Liability Cards
The employer is responsible for payment charges in this case. Nevertheless, the employee is still responsible for reporting those charges. The employer can then reconcile the card statements. The credit card issuer checks the company’s credit history before issuing the employee this card.
How Does a Corporate Credit Card Work?
Using a corporate credit card is very similar to using a personal credit card. During business travel, the costs an employee incurs are basic necessities like accommodation and flight bookings.
Without a corporate credit card, employees need to use their personal cards or cash for business expenses. Although reimbursable, employees need to forgo personal funds temporarily. This is where corporate credit cards work their magic.
Like personal cards, corporate credit cards are usable at the counter or for online payments during business travel. They are a convenient medium for the company to pay for employees’ business expenses.
The payments made through them are registered on the company’s card statements. This lets the employees’ personal funds remain untouched while the company can personally access and track card usage.
How Do You Qualify for a Corporate Credit Card?
Aside from minimum annual revenue in the millions, qualifications for a corporate card typically include:
At least 15 users of the corporate account within the company.
Projected credit card charges of $250,000 or more a year.
Registration as an S corporation or a C corporation.
A company seeking an American Express corporate card must be in business for at least 12 months, must have a business address that’s not a home address and must not be a sole proprietorship.
Other requirements may come into play as well. For instance, corporate credit card issuers could ask for:
Federal tax ID
Information about the organizational structure
Audited financial statements
Company’s credit history and credit score
Contact details of the company’s representative, e.g., the company’s president or treasurer
As per the above criteria and information, credit card issuers decide if the company qualifies for a corporate credit card or not. You can check your business credit with resources including Nav.com and Credit.net.
How is a Corporate Credit Card Different From a Business Credit Card?
If you are a small business owner, you should first check whether a corporate credit card is right for your business or not. Corporate credit cards and business credit cards generally differ in two major aspects – eligibility and liability.
The basic difference between a business credit card user and a corporate credit card user is that of company size. Corporate credit cards are for companies that have annual revenue of over $4 million.
Business credit cards are for smaller companies with less frequent credit card transactions.
Business credit cards necessitate a personal guarantee i.e., both the employer and the cardholding employee are accountable for non-payments.
Some corporate credit cards, like American Express cards, offer joint liability as an option. Depending on the card type, either the employer or the employee is liable for payment charges and non-payments.
The employer can choose which kind of card to offer an employee as per the business needs.
Corporate Credit Card Benefits
One of the key advantages of corporate credit cards is the ability to more easily manage expenses. For employees, a corporate card can deliver financial relief.
It can eliminate the need for an employee to cover expenses such as hotel stays and flights and then wait to be reimbursed.
In addition, a corporate card can enable an employee to skip the tedious tasks of keeping receipts and submitting reimbursement forms.
Corporate credit cards also come with an array of perks. American Express’ Corporate Platinum Card, for example, provides access to more than 1,100 airport lounges in 120 countries.
While its Corporate Gold Card reimburses fees for membership in Global Entry and TSA Precheck programs, which can help you get through airport security and customs faster.
The One Card from Capital One earns 1.5 points per dollar on purchases if you choose a 14-day billing cycle, or 1.25 points per dollar on a 30-day billing cycle.
Visa-branded corporate cards provide benefits such as emergency cash advances; lost luggage support; replacement of your lost, stolen or damaged card within one business day.
Also insurance coverage for rental car losses caused by collision or theft if you used your card to reserve and pay for the car; and emergency assistance services, including emergency medical transportation.
Corporate Credit Card Drawbacks
Although corporate credit cards can be useful for companies and organizations, they aren’t without the risks and drawbacks inherent to all types of business credit cards.
One of the biggest problems with corporate credit cards is fraud – specifically, an employee putting personal expenses on a corporate card. Organizations lose an estimated 5% of their annual revenue to fraud, including corporate card schemes.
Another problem: A corporate card might encourage an employee to spend more freely, such as booking a stay at a luxury resort or forking over $400 for an extravagant dinner with a client.
On top of that, putting corporate cards in the hands of employees boosts the chances that a credit card or data associated with it could be stolen.
Corporate credit cards are an effective way for employers to trail their employees’ card expenses. It is also an effective way to negate risks attached to personal card usage and business expense reimbursements.
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