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What Is a Corporate Credit Card?

Alise Bailey, Editor
Square

As your company grows, so do its financial management needs. You have more vendors to pay, more employees to manage, more supplies to order, and more travel requirements. You might find that the small business credit card you started out with no longer fits the bill. If that’s the case, it might be time for a corporate credit card.

Below, we walk you through the pros and cons of getting a corporate credit card for your business.

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Corporate vs. small business credit cards

The key difference between a corporate credit card and a small business credit card is that most corporate credit cards hold the company, not a designated person, liable for any non-payment issues.

Typically, corporate credit cards are issued to businesses with annual revenues upwards of several million dollars. Business credit cards, on the other hand, are applicable to businesses of all sizes—from sole proprietors to mom-and-pop shops to LLCs with millions of dollars in annual billings.

When should you switch to a corporate card?

If you do over $4 million in annual revenue, have good business credit, expect your credit card transactions to be over $250,000 per year, and have at least 15 employee card users, it could be time to switch to a corporate credit card.

Pros of corporate cards

  • Less personal risk: With a small business credit card, your personal credit is on the line, regardless of who is using the account. Because of that, it’s essential to monitor card activity regularly for fraud, a task that can become unwieldy as more employees become authorized users. With corporate credit cards, the liability for nonpayment falls on the business entity rather than the individual.
  • Improved reporting and record-keeping: Corporate credit cards often come with powerful business analytics tools and reporting that allow your accounting department to easily track where and how money is being spent.
  • Easier expensing: You can integrate a corporate credit card with expense management solutions to make the expensing process more straightforward and efficient for you and your employees.
  • Ability to set limits: Many corporate credit cards let you set spending limits for authorized users to control spending.
  • More robust customer service: You typically get a dedicated customer service representative when you sign up for a corporate card.
  • Special benefits: Corporate credit cards can come with special perks, like travel and emergency assistance services for your employees.

Cons of corporate cards

  • Costs and fees: Corporate credit cards can be more expensive than small business credit cards. Their APR generally runs somewhere between 13 and 20 percent, and there’s often an annual cost for each card issued.
  • Employees lose opportunities for rewards: Employees don’t accrue points or miles for their own use when they use the corporate card.
    Must monitor employee spending: You need to set up a strict and clear company credit card policy and then monitor employee spending for any violations.

The typical corporate credit card application process

Just as with a consumer credit card, you can get a corporate credit card through most of America’s largest banks. American Express is the most popular issuer among companies, servicing 63 percent of Fortune 500 companies globally.

To obtain a corporate credit card, you have to turn over your company’s tax ID and corporate financial records to the credit card issuer for review.

Tips for creating your company’s credit card policy

When you have a corporate credit card program (or a small business credit card that you let other employees use, for that matter), it’s extremely important to create a company credit card policy and put it in writing.

Create a written agreement for employees to sign
Draft a document that outlines the ground rules for using the card. It should acknowledge that the employee takes responsibility for the card and agrees to follow company guidelines. It should also address who receives company credit card perks, and what happens when employees deviate from your company card policy guidelines.

Outline rules for spending
You can set limits on how much employees can spend on corporate credit cards. But it’s also a good idea to detail exactly what sorts of charges are appropriate and inappropriate for the company credit card. (Obviously, the card should not be used for personal spending.)

Acceptable charges usually fall into travel and entertainment (hosting clients for meals or traveling for business) and company expenses (ordering supplies or paying for services).

Clearly spell out the guidelines for each type of expense. You may want to set a dollar limit on meals and hotel costs, for example, or require that employees fly economy class. You can also stipulate that office supply orders stay below a certain level.

Of course, there are always exceptions, so make sure to detail the process for getting approval for expenses that are outside the written guidelines.

Create instructions for expense reports
Your corporate credit card provides overview reports on spending, but employees still need to submit documents that substantiate expenses. You might ask for receipts, delivery confirmations, invoices, or mileage logs for corporate credit card expenses, for example. There are a variety of software apps that can help streamline this expensing process.

FAQ

Can you get a business or corporate credit card with no personal guarantee?
Almost every bank will want a personal guarantee for a small business credit card. Corporate credit cards do not require a personal guarantor. The company, not the individual, is liable for any nonpayment issues.

Can you get a corporate card with bad credit?
Generally, banks require that your company have good credit and strong financials (strong balance sheet, profit-loss account, cash flow, and liquidity) to get a corporate credit card.

Can a corporate card affect your credit?
With a corporate credit card, the company is on the hook for the payment. Because of that, issuers don’t report corporate card activity in the employee’s name to the credit bureaus. With small business credit cards, employees are authorized users, so their activity is reported to the credit bureaus.

What is the typical business size/revenue for companies that decide to get a corporate card?
Corporate credit cards are designed for companies with over $4 million in annual revenue, a headcount of at least 15 credit card users, and expected annual credit card expenses of $250,000.

Are there non-credit-based alternatives?
If you accept Square payments, you can manage cash flow using Square Card, a customizable business debit card. It gives you real-time access to your Square balance so you can purchase inventory, supplies, or anything else you need to run your business as soon as you make a sale.

With Square Card, you can see a complete snapshot of your Square balance spending and activity within your Square Dashboard and in Square Point of Sale. You can also access reporting features that track business and personal expenses to improve cash flow management.

Alise is an editor at Square, where she writes about how to start, run, and grow a business, highlighting our sellers around the world.