As your business grows from a small startup to a well-established corporation, it becomes necessary to consider upgrading your financial instruments. This could involve transitioning from a business credit card to a corporate credit card.
However, before embarking on the extensive application process for a corporate credit card, it is important to evaluate whether it is the most suitable option for your company.
In this article, we will delve into the mechanics of corporate credit cards, explore strategies for effectively managing them within a company, and determine the suitability of transitioning from a business credit card to a corporate credit card for small businesses.
Corporations opt for corporate credit cards to enable their employees to make authorized business expenses, such as hotel accommodations and air travel, without having to use their personal credit cards or cash.
These cards typically bear the company’s name and the name of the designated employee who holds the card. In general terms, a corporate credit card is specifically meant for large companies that generate millions or billions of dollars in yearly revenue.
On the other hand, a business credit card is suitable for companies of any size, including small businesses and individual entrepreneurs. Corporate and business credit cards provide various advantages and are used for different purposes.
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What is a corporate credit card?
A corporate credit card is a specialized card that is given to a corporation. Unlike personal credit cards, which individuals are responsible for, the corporation itself is legally accountable for all the expenses made using this card.
As a result, corporate credit cards are typically offered to well-established and successful large companies with a proven track record and a strong business credit history. If your business is a Limited Liability Company (LLC), S-Corporation, or C-Corporation with a substantial business credit rating and generates millions in revenue, there is a possibility that your company could qualify for a corporate credit card.
Corporate credit cards offer a range of advantageous benefits, including cash rebates and frequent flyer miles. Nonetheless, the key advantage of a corporate credit card is the ability to provide individual employees with their own cards to cover their work-related expenses.
From purchasing plane tickets to renting office space, having a corporate credit card streamlines the management of business expenses for large corporations.
How do corporate credit cards work?
Corporate credit cards are similar to personal or small business credit cards in several ways. These cards enable businesses to make purchases and often offer rewards for corporate expenses. Regular payments on the corporate credit card account are necessary, and the usage and payment history of the card can impact the business credit score.
However, corporate credit cards provide additional benefits that may not be available with small-business credit cards. These advantages include the option to issue employee credit cards without having to take personal responsibility for the charges.
Corporate credit cards also typically provide access to specialized accounting software and services that assist businesses in managing their corporate credit line. Additionally, companies that use corporate credit cards may be eligible for discounts on various business expenses and purchases from retailers.
Types of Corporate Credit Cards
The responsibility of paying the credit card bill for a corporate credit card can vary depending on the type of card, with either the employee or the employer being held accountable.
A corporate credit card, also referred to as an individual liability card or personal liability card, puts the responsibility of paying the credit card issuer directly on the employee.
After making charges, the employee can then submit an expense report to their employer to receive reimbursement.
The credit card issuer will assess the employee’s credit history through a “soft pull,” which does not impact their credit score. However, if the employee fails to make timely payments, their credit score may be negatively affected.
In the case of a corporate credit card, the employer is responsible for paying the bill, although the employee may be held accountable for any unauthorized or personal charges.
Since the company is liable for the payment, the credit card issuer usually does not assess the employee’s creditworthiness.
However, the employee is usually required to submit regular expense reports to enable the company to reconcile the credit card statements on a monthly basis.
Benefits of a Corporate Credit Card
One of the main benefits of using a corporate credit card is that it simplifies the process of managing expenses for both employees and employers.
From a business standpoint, having a corporate card enables employers to set limits on the amount cardholders can spend per transaction, per spending category, or overall.
Furthermore, the company has the ability to control where the card can be used, restricting purchases to specific merchants, types of merchants, and locations. Additionally, corporate cards offer valuable documentation for tax purposes.
From the perspective of an employee, a corporate credit card eliminates the requirement of paying out of pocket for expenses related to business and then waiting for reimbursement.
Additionally, certain corporate credit cards provide a convenient electronic expense reporting system that automatically fills in company expense reports with purchase details.
This feature makes it easier for employees to submit reports that are both timely and accurate. One of the advantages of using a corporate credit card is that employees may have the opportunity to keep the rewards they earn.
These rewards can include benefits such as earning and redeeming points for airline or hotel loyalty programs. However, it is important to note that the employer may choose to retain the rewards for their own use.
Nevertheless, many larger companies offer their employees the chance to enjoy the advantages of rewards programs in order to enhance employee satisfaction.
Aside from the various rewards programs, a significant advantage of corporate credit cards for frequent travelers is the array of additional perks they offer. These include access to airport lounges, which can be extremely beneficial for individuals with lengthy layovers.
Furthermore, corporate credit cards provide travel and emergency assistance services, emergency card replacement and cash disbursement, as well as car rental collision damage waivers.
It is important for cardholders to carefully review the details in the credit card agreement to ensure that they have a clear understanding of how the benefits associated with the card work.
For instance, in order to activate the automatic coverage when renting a car, it is likely necessary to use the corporate credit card for the entire transaction and decline the collision damage waiver offered by the rental company.
If there is any uncertainty, it is advisable to contact the customer service number provided on the back of the card.
How do you qualify for a corporate credit card?
If you want to determine if your company is eligible for a corporate credit card, it is best to get in touch with a corporate credit card provider directly. Unlike personal credit cards, corporate credit cards usually have more extensive application procedures.
You might need to submit documents as evidence that your business generates enough income and incurs sufficient expenses to warrant obtaining a corporate line of credit. The application process might even involve a financial audit, so make sure you are ready for that.
Is it possible to obtain a corporate credit card if you have bad credit? In technical terms, yes. Unlike personal credit cards, corporate credit cards do not typically require a personal guarantee, so the credit issuer is unlikely to perform a thorough credit check on your personal credit.
This means that even if your personal credit score is low, your business may still be eligible for a corporate credit card. However, if your business has a poor credit history or a limited credit record, it may be more challenging to secure a corporate line of credit.
Conclusion
A corporate credit card is a versatile tool that allows businesses to efficiently monitor and handle employee expenses. It offers employees controlled financial flexibility and access to various credit card benefits. However, businesses usually need to fulfill stricter criteria to be eligible for a corporate credit card account.
I agree that corporate credit cards are a great tool for employees as it eliminates the need for out-of-pocket expenses and waiting for reimbursement. The rewards and perks that come with these cards are also a nice bonus. However, it’s important for cardholders to fully understand the terms
This article provides helpful information about the advantages of using a corporate credit card for employees. It highlights the convenience of not having to pay out of pocket and wait for reimbursement, as well as the potential rewards and perks that can be earned. It also emphasizes the importance of understanding the details of the credit card agreement. Overall, a useful read for employees considering a corporate credit card.
I found this article very informative. It highlighted the advantages of transitioning from a business credit card to a corporate credit card for large corporations. It also provided useful information about how corporate credit cards work and the benefits they offer. Overall, it made me consider