What is a corporate credit card?

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You’re a few years in with your small business — growth has happened every year, you have more employees than just yourself and are looking to expand your team again soon. The business is profitable, and revenue streams are showing a steady increase. This is the kind of growth most small business owners dream of.

When you start to see your company shift from a small start-up to an established corporation, it’s time to think about transitioning your financial tools. One part of that transition could be to switch from a business credit card to a corporate credit card.

What is a corporate credit card?

You can get a business credit card for almost any business venture you have, even if it’s just a side hustle. However, a corporate credit card, also known as a commercial credit card, is only available to large companies that have an established business credit history. Just like business credit cards, corporate credit cards offer businesses a variety of financial tools to help them manage their expenses.

Aside from the financial tools, corporate credit cards may also come with certain beneficial perks, such as cash rebates and frequent flyer miles. However, the biggest benefit to a corporate credit card is that individual employees can be issued their own cards to handle the specific business expenses for their work. Whether it’s paying for plane tickets or renting office space, having a corporate credit card can make handling business expenses for a large corporation much more efficient.

How do corporate credit cards work?

In order to be considered for a corporate credit card, your business needs to be a registered corporation, like an S-Corp or an LLC, with an established credit history. And the business should be looking at a projected use of the credit account in the hundreds of thousands of dollars and have a revenue expectation in the millions.

Most major credit card issuers, such as Discover and American Express, offer corporate credit cards. When deciding whether a company is eligible for a card, the issuer will consider the overall financial health of the business by looking at financial statements, tax information and details about how the company is organized.

Once approved for a corporate credit card, companies can issue individual cards to their employees. Each employee card will be printed with the company name as well as the employee’s name. Since corporate credit cards are used by several different employees, a company can also decide how they want to handle liability for charges made on their account.

If you have access to a corporate credit card, it’s important to understand your company’s policy on credit card liability. This information should be readily available in your company’s corporate card policy. It should tell you whether the company card has individual or joint liability and how using the company card will affect your credit.

Corporate credit cards vs. small business credit cards

Both corporate credit cards and small business credit cards are great financial tools for helping businesses take care of expenses and document expenditures. While there are quite a few similarities in how these cards work, there are some important differences to keep in mind.

Business credit cards

  • Designed for all types of small businesses, including sole proprietors and freelancers
  • Easy to apply for online
  • Can help establish a credit history for your business
  • May offer access to small business accounting software, such as QuickBooks
  • Earn rewards as cash back, miles, or points
  • Employees can receive authorized user cards and make purchases on behalf of the business
  • The business owner is liable for all charges made by employees

Corporate credit cards

  • Designed for corporations with revenue in the millions
  • Must apply through a bank or issuer
  • Must already have an established business credit history
  • May offer large-scale reporting tools to help manage finances and ensure employee compliance
  • Come with corporation-friendly benefits, such as cash rebates
  • Employees can receive their own corporate cards and make purchases on behalf of the business.
  • In most cases, the company will be liable for all business charges, though some businesses choose to make their employees partially or completely liable for charges

When do you need a small business credit card?

Small business credit cards are best for businesses that are just getting started. Unlike corporate credit cards, a small business credit card will use your personal credit report to determine eligibility. However, once you’re approved for a card, most card issuers will report account activity to the major business credit bureaus. For this reason a small business credit card is great for businesses that are looking to build business credit. Just make sure that your card issuer is reporting your account — some only do so upon request.

The great thing about a small business credit card is that it is accessible to anyone looking to start a business. Whether you’re a freelancer with a start-up or the sole proprietor of a hair salon, there’s a business credit card out there to help you take care of your business expenses and build your business credit. And you can even get a small business credit card if you don’t run a traditionally recognized business. As long as you bring in money independently from your day job, you can qualify. The steps for applying for a business credit card are pretty straight forward. Just make sure you do a bit of research beforehand to choose the best card for the needs of your business.

If your business has employees that need access to your credit account, you can add them as authorized users on your business credit card. Just be aware that you, as the primary cardholder, are responsible for any charges accumulated on the account.

When do you need a corporate credit card?

Corporate credit cards are meant to serve the larger financial needs of big businesses and corporations. These kinds of accounts deal with businesses that have expenditures in the hundreds of thousands and multiple employees making purchases on behalf of the company. They are meant for businesses that have revenue in the millions of dollars and the need to issue cards to a large number of employees.

When you make the move from a small business credit card to a corporate credit card, you are making a clear distinction between your personal finances and your business finances. The charges that are accumulated on a corporate credit card are the responsibility of the company you have built, not you personally. If a company defaults on its payments to a corporate credit card, the card issuer will go after the company for payment. This protects your personal liability. And when a company has multiple people making high dollar purchases on an account, that protection is important.

How do you get a corporate credit card?

Unlike a small business credit card, you can’t simply apply online for a corporate credit card. Instead, you will have to make a request for a corporate account through a banking institution or directly with a corporate card issuer. You can research corporate credit cards beforehand to get an idea of which institution or card issuer you want to start with. You should probably also talk with your accounting department for advice on how to move forward in the best way for the business.

To be considered for a corporate credit card, you will have to meet several business milestones. Your business needs to be a registered corporation and will need to have a documented tax ID. And, as stated before, your business will need a well established credit history and clearly documented financials. Average revenue for businesses applying for corporate accounts starts at around $4 million. Average yearly expenditures start at around $250,000. Your bank or card issuer will let you know if you are a candidate for a corporate account based on these and other criteria.

Once you are eligible for a corporate credit card, you will need to decide how you want to handle liability for charges on the card. Corporate credit cards have the option of individual or joint liability. Individual liability can fall completely on the company or on the employee. Joint liability means the liability is shared between the company and employee. If you choose to share liability with employees, you will need employee social security numbers before issuing their cards. The card issuer may also need to do a credit check for those employees being issued cards.

How do you manage a corporate credit card?

When you open a corporate credit card, make sure you communicate clearly with your employees what their liability is for any charges they make and the company card policy for making purchases. Make sure that employees understand that they should only make business purchases on the card and the consequences of making personal purchases.

Be sure to communicate with employees the importance of keeping up with payments and tracking receipts.  Each purchase should have a date and a clear documentation of what was purchased. If employees are prepaying purchases for reimbursement, make sure they understand how to file expense reports. Also, clearly explain any consequences for late payments. And if you are an employee with access to a corporate credit card, it is paramount that you know what your liability is for charges on the card. Even if the company is making payments on the card, if you have joint liability, a late payment could negatively affect your credit score.

Managing funds for large corporations takes work. Corporate credit cards offer some excellent financial tools to help you with reporting and having insight into your business spending. These tools can give you an idea of how to plan for future expenditures and growth and help you keep track of purchases being made on the account. This is important for ensuring employee compliance with company card policy. You can also use these tools to help you prepare for tax season and any audits that may happen.