Small Business Credit Cards vs. Corporate Credit Cards: What’s best for your growing business?

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So, you’ve got a small business. Maybe you have a few employees or maybe you’re hiring new people every six months. You’re increasing your revenue and growing your profits, and you’re wondering if it’s time to switch from a business credit card to a corporate credit card.  Opening a corporate credit card account could be a smart move for your growing business — but only if you’ve grown to a certain level. Until then, it’s best to stick with a small business credit card.

Here’s what you need to know:

What are the differences between small business credit cards and corporate credit cards?

Although small businesses can open both business credit cards and corporate credit cards, the two types of cards are not the same. Here are some of the major differences:

Business credit cards

  • Designed for all types of small businesses, including sole proprietors and freelancers.
  • Easy to apply online.
  • Good way to establish your business’s credit history.
  • Can upload transactions to small business accounting software such as QuickBooks.
  • Earn cash back, miles, or points rewards like personal credit cards.
  • Employees can receive authorized user cards and make purchases on behalf of the business. However, 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 a card issuer.
  • Business must already have an established credit history.
  • Offer large-scale reporting tools to help businesses manage their finances and ensure employee compliance.
  • Cards 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, your business will be liable for the charges, but some businesses elect to make their employees liable for the charges or to share joint liability with employees.

When do you need a business credit card?

There are a lot of reasons for small business owners, including sole proprietors and freelancers, to open small business credit cards. Applying for a small business credit card is a lot like applying for a personal credit card, and in most cases is a very easy way to help you establish your business’s credit history — which is important if you ever plan on applying for a small business loan.

Small business credit cards can help you manage your cash flow. If you have a low-revenue month but know that you’re going to be receiving more payments soon, you can use your small business credit card to cover expenses until more cash comes in.

You can even use small business credit cards to help grow your business. Having access to a line of credit means you can pay off a big expense, such as a new marketing campaign or travel to an upcoming conference, over time. You should avoid making purchases that you don’t anticipate ever being able to pay off, but in general, it’s okay to occasionally carry a balance on a business credit card as long as you make your minimum payment — and don’t forget, business credit card interest is tax-deductible!

If you have employees, you can issue them authorized user cards and delegate some of your business spending. However, you will be liable for all charges on your business credit card account, even charges made by employees.

Lastly, remember that the best small business credit cards offer rewards: cash back, miles, and points that can help you save money over time.

When do you need a corporate credit card?

As your small business continues to grow, you might want to consider switching from a small business credit card to a corporate credit card. Unlike a small business credit card, you won’t be able to fill out a quick online application. To set up your business and your employees with corporate credit cards, you’ll need to work directly with a corporate credit card issuer. Your bank can help you get started, and you can also research corporate credit cards online and follow their instructions to get connected with someone who can help you.

Corporate credit cards are generally best for businesses that have revenue in the millions of dollars, as well as large numbers of employees who are making purchases on behalf of the business. Your business should already have an established credit history, which will be reviewed as part of your corporate credit card application.

When you go from a small business credit card to a corporate credit card, you transfer liability from yourself to your business. With a small business credit card, the business owner is ultimately liable for all charges made to the card (either by yourself or by your employees) — which means you could end up paying out of pocket if your business doesn’t earn enough revenue to cover your card balance. With a corporate credit card, your business is liable for all charges, which protects your personal liability and helps further separate your finances from your business’s finances. If you issue credit cards to your employees, you have the option to make your employees liable for charges on their card or to share liability with your employees, but many businesses elect to remain liable for all charges on all cards, even those issued to employees.

Corporate credit cards also offer robust reporting tools designed to help you analyze your business’s spending, plan for the future, and ensure employee compliance — after all, you don’t want your employees charging personal purchases to their business credit cards!

Is it time to move from a small business credit card to a corporate credit card?

If you’re considering transitioning from a small business credit card to a corporate credit card, start by asking yourself whether your business has hit all of the milestones on the list: An established credit history, annual revenue in the millions, many employees.

Then, reach out to a bank or a corporate credit card issuer. They’ll let you know whether they think your business is a good candidate for a corporate credit card. It’s also a good idea to talk to your accounting team; they’ll probably have advice on whether it’s time to make the move.

If you are eligible for a corporate credit card, ask yourself how you want to handle liability: Will your business be liable for all charges, will your employees be liable for charges made to their cards, or will you and your employees share liability? Be aware that employees aren’t always happy to take on liability for a corporate credit card; if your business misses a payment, for example, it can affect your employees’ credit scores.

Once you have your corporate credit card or small business credit card, use its reporting tools to fine-tune your business spending, prepare for taxes and audits, and ensure employee compliance. Use the card itself to fund business expenses, take advantage of business-friendly benefits, and help your business grow.

Check out some of our individual credit card comparisons here.