Corporate credit cards offer features small business cards don’t (and vice versa). But they’re generally available only to businesses with at least several million dollars in annual revenue.
Whether your employees fly a lot and need a card to reserve plane tickets or they purchase lumber or office supplies for the company at the store, getting them a company credit card is often a great way to keep track of expenses and make it easy for them to purchase what’s needed.
For many entrepreneurs, a small business credit card is the best solution. Many are designed to reward the types of purchases that employees typically make in a small firm.
However, for larger small businesses, getting a corporate credit card, like the ones big corporations issue to employees, often makes sense.
What is a corporate credit card?
Corporate cards are generally available only to larger small businesses, meaning those with at least several million dollars in annual revenue. A company may have to submit a federal tax ID and undergo an audit of its financials to qualify.
For example, the One Card from Capital One requires its users to have a minimum annual card spend more than $1 million. Cards are issued to the company itself (rather than any individual) and require that you submit your tax ID and require an audit of company financials before approval.
Similarly, the One Card from J.P. Morgan is available to businesses that spend between $1 million and $9.9 million per year. The bank can also match companies that spend $20 million or more on travel with corporate credit cards.
Once an account has been opened, the company is responsible for paying the balance in full each billing cycle and managing spending of each cardholder. However, it is also the company that reaps any rewards the card may include, including statement credits or travel perks. In the case of the One Card from Capital One, businesses earn competitive rewards up to 1.5X net purchases.
How corporate cards differ from small business credit cards
Both corporate and small business cards offer conveniences such as the ability to set limits on employees’ spending and to restrict spending to certain categories. Most also offer features that make it possible to track expenses easily.
However, corporate cards come with certain benefits that small business cards don’t offer – and vice versa.
Unlike corporate credit cards, business cards are available to businesses of any size – even entrepreneurs just getting started on their own. The application process is much less intensive and usually doesn’t require an audit of company finances.
Responsibility for the debt
Business cards are issued to an individual and the company (unless it is a sole proprietor), and even if additional cards are added for employees, the business owner is responsible for managing payments.
Typically, a small-business owner must personally guarantee a small business card, though some small business cards come with joint and several liability, where the owner shares liability with the business. With joint and several liability, a creditor can pursue either the business or the owner for a debt.
With most corporate cards, the company is generally liable for the debt on employees’ cards, which is a big advantage in many owners’ eyes. When the company guarantees the debt, the owner is not held responsible if, for instance, the company fails without paying its bills.
Some corporate cards also offer what’s known as individual liability. That means the employee must stay current on paying the bill in the short term and request reimbursement upon filing an expense report. This is less common than it used to be. It’s not necessarily ideal for employees, who may not have the cash available to pay for large charges until their expense report is processed.
Corporate credit card pros and cons
The biggest perk attached to corporate cards is the ease of tracking employee spending. Rather than having employees make personal charges and submit expense reports or receipts for reimbursement, the company can easily manage spend limits, track budget needs and manage fraud risk. Most corporate cards offer detailed analytics all in one system about where and how company money is being spent.
Since these cards are sometimes more complex, corporate cards often come with their own designated customer service representative who can help resolve any issues quickly. These representatives are usually on-call 24/7 and have an intricate knowledge of each company’s individual needs.
- You’ll get simplified tracking and analysis of work-related purchases
- Benefits and rewards directly help your business
- You get a dedicated or on-call customer service representative
- Prevents employees from trying to make personal charges on a company card with clearer visibility and better spending controls than most business cards
- Additional cardholder fees can add up quickly
- It’s not an option for smaller companies
- The application process can be tough
- Employees can’t earn their own rewards by using a personal card and getting reimbursed
How corporate cards impact credit
While corporate cards are typically used for work-related travel and accommodation, business cards can be used to make all sorts of work purchases, including supplies or merchandise. This allows even small businesses to build a great credit profile. By using a business card to make larger payments, business owners can avoid racking up charges on their personal credit cards while steadily building their business credit.
With small business cards, employees are considered authorized users. As a result, their card activity may be reported to credit bureaus.
For some employees, this is a drawback. For instance, if they have put expenses from a costly business trip on their card, they may find their credit utilization is high enough to affect their personal credit. That could be a problem if, for instance, they are applying for a mortgage.
In contrast, with a corporate card, card usage does not affect employees’ personal credit. That is a big plus from an employee’s point of view.
Corporate card costs
Small business credit cards tend to have fewer fees, including no additional charge for employee cards with cards such as Capital One Spark Cash Plus and the Ink Business Unlimited® Credit Card from Chase.
Corporate cards generally charge for this and may charge as much as $100 a year or more. This is because they often offer more robust features, like access to a specific sales rep or access to enterprise software for filing expense reports.
Of course, if you run a larger small business, the extra benefits may be worth it. It all depends on the needs of your business.
Should you get a corporate card for your business?
While corporate cards offer a wide range of great benefits such as easy expense tracking, dedicated customer service representatives and no liability for individual employees, they are typically only available to large corporations with millions in annual revenue.
If you own a small business, a business credit card can help steadily build a credit history for your company. Business cards can also help you make large purchases to pay off over time.