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Corporate credit cards are intended for businesses with several million dollars in annual revenue. They differ from regular business credit cards chiefly in that these cards do not require a personal guarantor. Therefore, any late payments, delinquencies, or other actions are tied entirely to the company the card is issued to – not any one individual. This comprehensive guide to corporate credit cards will walk business owners through everything they need to understand about this financial product, and whether getting a corporate card is a good option for them.
Corporate Credit Cards: Business Perspective
One of the most important features of corporate credit cards is that they do not require a personal guarantor. Your business will be required to submit its Tax ID number to the issuer of choice, after which an audit of your company's financials will be preformed - specifically the company's business credit score. Provided that all the minimum requirements are met, a contract will be drawn up by the issuer, and the corporate credit card account may be opened. Failure to repay any debts will count as a negative mark against the company, and not any one particular individual employee or owner.
Corporate credit cards can provide rebates and rewards, just like ordinary business and consumer cards. These, however, are credited back to the main company account. Most issuers also offer non-rewards options, specifically meant for large companies and non-profits (with revenue of $10MM+) that have internal corporate policies preventing them from taking in this kind of revenue or price reduction benefits.
Just like consumer credit cards, corporate credit cards are issued by most of America's largest banks - Citi, JPMorgan Chase, Bank of America, and Capital One. The most popular corporate credit card issuer among companies is American Express. The issuer services 63% of all Fortune 500 companies globally.
Corporate credit cards are also often equipped with powerful analytics tools that allow company accountants and managers to have a better grasp of where money is being spent. Banks such as Capital One or American Express allow their business clients to set up different tracking options - whether it be by department or different vendors. Having this level of control is also important when it comes to reconciliation and reimbursement. Because corporate credit cards are often issued to a large number of employees, keeping track of the different spending can become difficult. As your company grows and expands, corporate credit cards are designed to scale with it, making sure your company doesn't lose any control of its expenditures.
Corporate Credit Cards: Employee Perspective
From an employee's point of view, using a corporate credit card can be good or bad. Those who are issued a card will generally be required to submit receipts for their spending with the company. This is an easier task than filling out expense reports - which is often required of employees in companies without corporate credit card accounts. Having the ability to use a company credit card also has a major upside for the employee’s financials. By using a corporate credit card, he or she will not have to use their own personal funds in order to cover a business expense.
By using a corporate credit card, employees will not earn personal miles/reward points. If using a personal card, an employee would simply submit an expense report, be reimbursed for all business costs. Despite the reimbursement, however, the employee would get to keep the reward miles, points, or cash back he or she earned in the process.
The major downside of having to use a corporate credit card comes into play when considering one's credit score - which we explore in greater detail in the following section.
How A Corporate Credit Card Might Impact Your Credit Score
Corporate credit cards can either negatively impact your credit score or not at all. Any spending you do using such a card will not build your personal FICO score up in the slightest, since the account will not appear in your credit history.
If you are about to be issued a corporate credit card, depending on the financial institution in question, the issuer may run a credit check against your personal history. American Express, for example, has such a policy in place. This hard pull on your credit history will have a temporary impact on your FICO score, though it is minimal. As mentioned, the new credit card account will not be listed under your credit file. Late payments and delinquencies on the company's side will not, therefore, show up and negatively impact your credit score. However, in the event that you fail to submit an expense report with your company, or the firm refuses to cover a particular charge, things get a little less clear. If a charge is not cleared within 6 months, American Express has gone on record to say they will report the employee to the credit reporting agencies.
Since holding a corporate credit card can only hurt your credit score, it may appear to employees as a liability, instead of a useful tool.
Corporate Credit Cards vs. Small Business Credit Cards
The major differentiator between small business credit cards and corporate credit cards is their customer base - the former are targeted at companies with few employees and annual revenue below $4MM. If your company is nowhere close to this revenue cap, it is not worthwhile to consider a corporate credit card.
Small business cards are low cost. Companies that opt for some of the largest issuers - Chase, Citi, Bank of America, Capital One, or Amex - will typically have to pay just one flat annual fee, with additional employee cards not costing them anything extra. Because they come with significantly higher upkeep, corporate credit cards can range anywhere between $39 and $100+ per employee. This, of course, also takes into account scale. While corporate credit cards are more expensive, the firms they are issued to have higher revenues, making the relative cost to the company level minimal.
The extra cost of corporate cards goes into covering the higher level of customer service and business solutions that go into maintaining an account. For example, instead of having to call a customer service line every time an issue arises, most corporate credit card accounts come with a dedicated relationship agent. This person will be keyed into your company's needs and issues, making it significantly easier to troubleshoot through problems.
Finally, small business credit cards place a heavier emphasis on rewards and individual perks. While corporate credit cards still have reward programs, they are rarely the major selling point. Certain small companies may even have employees use their personal credit cards to cover business expenses, and then submit receipts and expense reports for reimbursement. This way, employees can earn rewards points - hopefully using one of the most rewarding credit cards - while not actually paying for things. The downside of this approach, however, is that the employee makes themself liable for all charges. In the event that a company refuses to reimburse a charge, the employee who made that purchase will still be held accountable for it - any failure to repay the debt can result in damage to the employee's credit score. With corporate credit cards, on the other hand, the company handles all the accountability for the most part.