What Is a Corporate Credit Card?
Corporate credit cards are credit cards issued to employees of established companies that let them charge their authorized business expenses—such as hotel stays and plane tickets—without having to use their own card or cash. These cards, which are also known as commercial credit cards, can make it easier for employees (and employers) to manage expenses, and many offer perks like frequent flyer miles and access to airport lounges.
- Corporate credit cards make it easier for employers and employees to manage expenses.
- Corporate cards are issued to larger, established companies and differ from business cards available to sole proprietorships and DBAs.
- Employees need to learn and follow their company’s corporate credit card policies before making any charges.
- Depending on the card, either an employee or the employer will be responsible for paying the credit card bill.
How a Corporate Credit Card Works
Corporate credit cards are designed to meet the needs of established companies—typically those with at least $4 million in annual revenues, 15-plus card users, and projected charges of $250,000 or more each year. While most businesses, including sole proprietorships and DBAs, can get a small business credit card, corporate cards (as the name implies) are reserved for corporations. That means the company must be structured and registered as an S or C corporation to be eligible.
Major credit card issuers, such as American Express, Capital One, Citibank, Chase, and Wells Fargo, offer corporate credit cards. The cards are issued based on the company’s financial health—not the owners’ personal finances. Cards issuers may, for example, require the company to have strong financials, plus good liquidity and cash flow.
Corporate credit card issuers typically want to see a company’s recent audited financial statements, details about the company’s structure and organization, tax information (including a federal tax ID), and contact information for a company officer who is authorized to do business on behalf of the company—such as an owner, president, or treasurer.
An employer may provide certain employees with a corporate card so they can pay for approved business expenses, such as hotels, meals, rental cars, and flights, and also access cash at ATMs—all without using their own funds or a company advance. The company’s name will be on the card, along with the employee's name as a designated cardholder. The employee's signature goes on the back of the card, just as it would on a personal credit card.
Types of Corporate Credit Cards
Depending on the type of corporate credit card, the employee or the employer will be responsible for paying the credit card bill. With an individual liability card, the employee is responsible for paying the credit card issuer directly for any charges, plus filing an expense report and getting reimbursement from the employer. The credit card issuer checks the employee's credit before giving them a card, but it’s a “soft pull” that won’t affect their credit score.
If it’s a corporate liability card, the employer pays the bill for any approved charges (although the employee may be on the hook to pay the issuer directly for any unauthorized or personal expenses). Because the company is responsible for paying the bill, the credit card issuer typically won’t check the employee's credit, but that person will likely be responsible for filing regular expense reports so the company can reconcile the card statements each month.
Before an employee uses a corporate credit card, they should find out who is responsible for paying the bill each month. If they are responsible, they should set up a system to make sure payments are on time and that they have the funds on hand to cover the balance.
Benefits of a Corporate Credit Card
A key advantage of a corporate credit card is that it makes it easier to manage expenses—for employees and employers alike. From a business perspective, a corporate card allows employers to place limits on how much cardholders can spend per transaction, per spending category, or overall. The company can also control where a card can be used, limiting purchases to specific merchants, types of merchants, and locations.
From an employee viewpoint, a corporate liability card can mean financial relief, since it eliminates the need to pay upfront for business-related expenses and then wait for reimbursements. Another benefit is that some corporate credit cards offer electronic expense reporting that automatically populates company expense reports with purchase information—a feature that makes it easier (i.e., less of a hassle) to submit timely and accurate reports.
Another major perk is that, depending on the employer, cardholders may be able to keep any rewards they earn while using a corporate credit card. They may, for example, be able to earn and redeem rewards for a frequent flyer program or a hotel’s frequent guest program. Of course, the employer may decide to keep the rewards in order to offset annual corporate costs or to offer incentives to top-performing employees. Still, many larger companies allow employees to reap the benefits of rewards programs since doing so can improve employee morale.
In addition to rewards programs, many corporate credit cards offer benefits that frequent travelers will appreciate, such as access to airport lounges (a huge plus if a traveler has a long layover), travel and emergency assistance services, emergency card replacement and cash disbursement, and car rental collision damage waivers. Read the fine print on the credit card agreement to ensure you understand how these benefits work. To activate auto coverage when renting a car, for instance, you probably have to complete the entire transaction with the covered credit card and decline the rental company’s collision damage waiver. When in doubt, call the number on the back of the card.
Company Policies for Corporate Credit Cards
Employees should know their company’s policies concerning corporate cards from the get-go to avoid making mistakes that could lead to accounting nightmares—or worse. Cardholders should familiarize themselves with their company’s general spending and reporting requirements and find out if they have spending limits that apply to certain categories. It’s also important to learn about any department- or position-specific rules. Company executives, for example, will likely have different spending profiles than, say, middle management.
Once a cardholder learns their company’s policies, they should stick to them. If they use their card to buy something that’s not an approved business expense, it can make them look bad in the eyes of their employer—even if it’s an honest mistake. What's more, many large companies have a travel and entertainment card manager on staff who could audit employees' expenses at any time. It's important for cardholders to use common sense to decide if a charge they're about to make is 100% job-related. If not, they should put it on their personal card and sort it out later if they feel entitled to full or partial reimbursement.
To avoid accounting nightmares—or worse—don’t mix personal expenses with business spending.
Before a corporate credit card is activated, an employer may offer (or require) in-person or online corporate credit card training sessions designed to help employees learn the policies. In addition, an employer may post and update policies on its Intranet site. It’s always a good idea to stay informed, follow the rules, and avoid doing anything that could result in extra paperwork or be construed as fraud. Cardholders who have questions about their employer’s policies should contact the person (or department) that manages the program.
Besides understanding and following company policies regarding spending limits, types of expenses that are allowed, and how expense reports are handled, it's important for employees to be aware that if they—and not their employer—are responsible for paying the credit card bill, their credit score could drop if they fall behind on payments. AmEx, for example, reports accounts to a credit bureau if the account becomes 180 days past due. It’s a good idea to set up an e-mail alert as a reminder of when those payments are due.
Just like any credit card, employees should treat their corporate credit card with care and keep it in a safe place to prevent theft or loss. If a card is lost or stolen, it should be reported as soon as possible so the card can be canceled and replaced.