What to Know About a Corporate Credit Card

Employers and employees use corporate credit cards to streamline expenses, make travel arrangements and pay for things like client meals and meetings. While often viewed as a perk, these cards are an important part of doing business. But what are the rules for corporate credit card use, and who tracks the expenses?

Corporate credit cards provide many benefits for businesses, but they also come with caveats. This article will look at what to expect when using a corporate credit card. We’ll discuss the pros and the cons.?

What Is a Corporate Credit Card?

Corporate credit cards are credit products specifically designed for businesses. These cards typically offer features and benefits catered to business expenses, such as higher spending limits, cash-back rewards on business-related purchases and extended warranty protection.?

Corporate cards provide advantages for businesses of all sizes, making them an essential tool for many companies. In particular, they make tracking employee spending transparent and easy and can eliminate the need for expense reports.

How Do Corporate Credit Cards Work?

Corporate credit cards function similarly to regular credit cards but are for business use. Companies can use them to make purchases and build a line of credit. Employees can also use them for work-specific purchases such as client lunches and travel arrangements.?

Pros of Corporate Credit Cards for Employers

The benefits of having a corporate credit card for employers include:

• Convenience: A corporate credit card makes it much easier for employers to track business expenses. With all charges appearing on one monthly statement, employers can quickly and easily see where they are spending money.
• Flexibility: Corporate credit cards offer employers great flexibility when making purchases. Employers can use corporate credit cards for business expenses, such as paying for office supplies or travel arrangements.
• Reward programs: Many corporate credit cards offer rewards programs that can save employers money on future purchases. Some rewards programs offer cash back or other perks to offset business expenses.
• Better expense management: When employees use corporate credit cards, it can be much easier for businesses to track and manage expenses. A company can more easily monitor and control spending because corporate cards enable them to consolidate expenses into a single bill.
• Reduced risk of fraud and embezzlement: If used properly, corporate cards can help reduce fraud and embezzlement. Employees will be less likely to make personal purchases on their corporate cards and can be more easily held accountable for any suspicious activity.

Pros of Corporate Credit Cards for Employees

There are plenty of reasons to consider using corporate credit cards for your employees. Here are some key advantages:

• Spending power and purchasing flexibility: Corporate credit cards can give employees a significant boost in spending power and purchasing flexibility. This can be extremely helpful for employees who travel frequently or need to make large purchases on behalf of the company.
• No reimbursement delays: Employees who use a corporate credit card for business expenses can forgo the sometimes lengthy and laborious practice of submitting expense reports. Not having to pay out of pocket up front means no long waits for reimbursement.
• Separate from personal credit: An employee’s personal credit score is not at risk when using a corporate credit card.?

Cons of Corporate Credit Cards for Employers

While corporate credit cards offer several advantages, there are also some potential drawbacks that employers should know.?

• Liability: Corporate cards can be a significant financial liability for employers if not carefully managed. Suppose employees abuse their corporate credit cards or rack up large balances that the company cannot pay off. That could negatively impact the business's bottom line.
• Additional work: Corporate credit cards can create accounting and administrative headaches for employers. Suppose employees frequently make personal charges on their corporate cards. In that case, it could be difficult for employers to keep track of expenses and ensure that they properly account for all business-related costs.
• Fraud: There is also the potential for fraud. Employees could use them for unauthorized purchases if businesses don’t manage corporate credit cards correctly.
• Potential for abuse: While most employees will use corporate credit cards responsibly, there is always the potential for abuse. Employees could make personal purchases on their cards or rack up large balances that the company would be responsible for paying. Employers should set clear guidelines for how to use corporate credit cards and monitor expenses closely to avoid abuse.

Cons of Corporate Credit Cards for Employees

Corporate credit cards can be a great perk for employees, allowing them to manage business expenses easily. However, there are also some potential drawbacks to consider.

• No rewards: Because the employer is the cardholder, employees cannot earn credit card rewards as they would if they used their own card for purchases and received reimbursements.
• Increased paperwork: Corporate credit cards can create additional paperwork for employers and employees. Depending on the employer’s processes for corporate credit card use, employees may need to submit receipts or expense reports.

Corporate Credit Cards vs. Small Business Credit Cards

The choice of credit card is important for businesses. There are two types of business credit cards: corporate credit cards and small business credit cards. Here is a comparison of the two:

Corporate Credit Cards:

• Usually have higher credit limits than small business credit cards
• May offer additional perks, such as travel insurance and rewards points
• Tend to have higher interest rates
• Require good to excellent credit scores for approval

Small Business Credit Cards:

• Have lower credit limits than corporate cards.
• Offer fewer perks than corporate cards.
• Tend to have lower interest rates.
• Often have more flexible approval requirements than corporate cards.

A corporate credit card may be the right choice for companies that need a higher credit limit and can manage a higher interest rate. However, a small business credit card may be better for those with less-than-perfect credit.

How to Qualify for a Corporate Credit Card?

A business's income and expenses must be high enough to qualify for a corporate credit card. Unlike personal credit cards, corporate credit cards have a longer application process and may require additional documentation.?

These documents help to prove that the business’s income and expenses warrant a corporate credit card and the risks that come with a high credit limit and multiple authorized users. Contact corporate credit issuers directly to ensure the applicant takes the correct steps and knows all available options.?

Tips for Managing Corporate Credit Card Expenses

A corporate credit card can be a helpful tool for managing business expenses. However, here are a few things to keep in mind to stay within a designated budget:?

1. Be aware of any fees associated with the card, such as annual or monthly charges.
2. Keep track of expenses and ensure that employees charge only business-related items.
3. ?Try to pay off the balance in full each month to avoid accruing interest.?

A company credit card policy will make it clear to employees what is an acceptable use of the credit card to cut back on abuse. It should outline approved spending limits, appropriate purchases and how to accurately track expenses for the accounting department.

Final Thoughts: Is a Corporate Credit Card Right for Your Business?

A corporate credit card can be a valuable tool for any business. A corporate credit card offers many benefits, including convenience and streamlined expense tracking. However, it is important to consider the drawbacks before applying for a card.?

Ensure employees understand the details of corporate cards' rewards and risks so teams can make the best decisions for the business.

Top Takeaways

What to know about a corporate credit card

• With a business credit card, teams can access money for daily operations.?
• Corporate credit cards generally offered benefits catered to businesses. Typical perks include higher spending limits, cash-back rewards on business-related purchases and extended warranty protection.
• The application process for a corporate credit card can be lengthy and typically requires more documentation than a personal credit card might.

(Reporting by NPD)