When Is A Corporate Credit Card Right For Your Small Business?

Business credit cards can be broken down into two broad categories: small business credit cards and corporate credit cards. Generally, companies with at least $4 million in annual revenue and good business credit are candidates for a corporate credit card.

However, a lot of questions arise when business owners consider switching from expense reimbursements and / or small business credit cards to a corporate credit card. In this article, we’ll discuss corporate credit cards, how they work, and how they might benefit your company.

If your business isn’t a good fit for a corporate credit card, check out Chase’s business credit cards. Chase Ink Business Cash^SM Credit Card, offers cash back rewards as well as competitive rates. Also, you can get employee cards at no additional cost and set spending limits for each card.

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What Is a Corporate Credit Card?

A corporate credit card is designed for growing small businesses with $4 million in annual revenue, good corporate credit rating, headcount of at least 15 credit card users, and expected annual credit card expenses of $250,000. Benefits include scalable financial controls, lower annual fees, cash rebates, enterprise perks, and sometimes no personal liability.

Corporate credit cards are a distinct type of card, different from small business credit cards, fleet cards, and small business fuel cards. Corporate credit card accounts are issued based on the metrics and creditworthiness of a small business and not the individual business owners.

Corporate cards are given to select employees and are used to pay for regular business-related expenses, such as travel. A corporate credit card is a small business financing option that saves employees time.

Corporate Credit Card Rates, Costs, & Terms

Typical Rates, Costs, & Terms of Corporate Credit Cards

According to ValuePenguin, the cost per corporate credit card is usually between $39 and $100 per year. There is usually no limit placed on the number of corporate cards that can be issued under and account. Corporate cards have a range of possible APRs that are currently similar to small business credit cards. Generally, the APR on a corporate credit card is between 13% – 20%, with an average of 15.37%.

Payment terms are generally monthly, meaning that similar to a personal credit card, you have 30 days to repay the transactions and avoid any late fees. Some corporate credit cards, however, have a “no carry balance” provision, forcing you to pay off your corporate credit card in full each month. Further, other corporate credit cards may offer shorter payment terms in return for more favorable perks and rewards. It’s important that you review the full terms of each card you’re considering.

Corporate credit card accounts cannot be obtained online. Instead, corporate credit cards typically require a previous relationship with a business banking manager or establishing a new one. Through this relationship, a business owner can discuss the qualifications and usefulness of a corporate account for his or her business.

Types of Corporate Credit Card

There are two specific types of corporate credit cards:

1. Company payment card – No personal guarantee. The business is fully liable for all expenses.
2. Individual payment cards – Joint liability between the business and cardholder in most cases. Employees might be liable for expenses under certain circumstances.

Now let’s look at each in detail.

1. Company Payment Card

This is the most popular type of corporate credit card and is used by 67% of all corporate cardholders. It’s considered a “company liability” card because the business is fully responsible for the overall credit balance. This means that team members don’t have to pay their credit balance themselves, submit an expense report, and wait for reimbursement.

Employees also don’t have to sign a guarantee; their personal credit score is protected from any company payment card activity. Any perks and rewards will, therefore, be credited directly to the main corporate account.

Company payment cards make it really easy on employees. They do away with expense reports and personal liability. However, team members are responsible for paying vendors for any unapproved or personal charges, depending on internal company policy.

From a business’s perspective, the company is provided a centralized dashboard where it can track and analyze credit card expenses in real time. The company can also place spending limits and transaction limits on the overall corporate account as well as on a card-by-card basis. This helps with budgeting and fiscal responsibility, saving a business time and money.

2. Individual Payment Card

Individual payment cards are the less popular type of corporate card, with 33% of corporate account holders using them.

The largest difference between individual payment cards and company payment cards is that employees are responsible for paying their monthly bill and submitting an expense report to their employer. The company will then reimburse its employees after the report is approved.

An employee’s personal credit might be checked before being issued a card. On average, 58% of employees’ credit scores are checked for verification. Employees are asked for signed permission, and the credit check is a “soft pull,” meaning that it isn’t considered an inquiry and doesn’t affect their credit score. Any credit card perks and benefits go straight to the company account.

Employees can be liable for the activity on their individual payment cards. American Express, for example, is a joint liability card. An employee’s personal credit won’t be harmed if payments are made in full within 180 days. Beyond the 180 day grace period, American Express reports the late payment to the credit card bureaus, which hurts an employee’s personal credit.

Other lending institutions consider the employee to be fully liable, while some lenders only hold the business liable. It depends on the card issuer and the account type. Anyone held personally liable will see the corporate credit card on their personal credit report. Make sure you check with your banking relationship manager regarding the liability of individual payment cards.

Individual payment cards hold employees responsible for any late charges. Businesses can cover these fees by creating an internal policy that reimburses employees for certain charges. This is in contrast to company payment cards, where the business is solely responsible for all fees.

Similar to company payment cards, individual liability cards take advantage of spending and transaction caps, thus saving the business time and money.

What Types of Businesses Qualify for a Corporate Credit Card?

Corporate credit cards are offered by large financial institutions, such as Capital One, JPMorgan Chase, American Express, Citigroup, as well as cards sponsored by Mastercard and Visa.

They are issued based on a business’s financial performance, credit rating, and size. A business owner’s personal credit is not considered. The major qualifications for a corporate credit card account are therefore fairly standardized. The most important metrics that lending institutions consider include:

• Revenue – Typically will have at least $4 million in annual sales
• Business Credit Score – A “good” credit score, rated by one of three business credit rating agencies: Experian, Dun & Bradstreet (D&B), Equifax.

A “good” credit score number varies depending on the rating agency. Experian, for example, considers good credit to be rated 75 out of one hundred. D&B rates a good credit rating as 80 out of 100, and Equifax uses three separate ratings to determine a company’s credit rating.

You can check your business’s credit score for free here. You can also read our in-depth guide to business credit scores.

In addition to business revenue and corporate credit rating, three additional rules of thumb apply when deciding to open a corporate credit card account:

• At least 15 employees who make consistent purchases on behalf of the company
• Expected credit card transactions equal to $250,000 per year
• Existing and established expense policies

However, these are general guidelines based on usefulness and aren’t strict requirements outlined by corporate card issuers. It’s important that you reach out to your existing relationship banking manager to further discuss your qualifications and needs.

If a corporate credit card isn’t the right fit for your small business, check out the Chase Ink Business Cash^SM credit card. You can get employee cards at no additional cost, set spending limits and earn cash-back rewards on all expenses. New Chase customers are eligible for a bonus of up to $500. Apply online in minutes.

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How Do Corporate Cards Differ From Small Business Credit Cards?

At this point, you might be wondering about the differences between corporate credit cards and small business credit cards. Chances are you either have an existing small business credit card or are deciding between a corporate account and a small business account.

Remember, if your business does less than $4 million in annual revenue and / or doesn’t have adequate business credit, a small business credit card is probably right for you. These credit cards are available for businesses of all sizes – even sole proprietors – and help a small business owner delineate between personal and company expenses.

Below, we’ve outlined the four key elements of a small business credit card and how corporate cards differ. This should give you a better understanding of which is right for you.

Personal Guarantee

Unlike most corporate credit cards, small business credit cards require a personal guarantee for the initial application. This means that a business owner needs to provide the company’s TIN as well as their SSN.

Similar to corporate credit cards, business credit cards don’t show up on a cardholder’s individual credit report. However, since a personal guarantee is required, cardholders – including business owners – are responsible for all outstanding business debts on the card.

Company payment cards, on the other hand, do not hold the individual cardholder liable. Individual payment cards may or may not hold the cardholder responsible, depending on the issuer and card type.

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Annual Fees

A flat annual fee is required for all small business credit cards. The average fee is $99, but it can vary depending on the card’s perks, payment terms, and APR. There is also typically an additional cost for each cardholder that’s added to a small business credit card account.

This annual amount varies but can be as high as $300 per person, as is the case with the American Express business platinum card. This is in contrast to corporate credit cards that have a per card cost between $39 and $100 a year.

Perks and Rewards

Small business credit cards offer perks and rewards similar to personal credit cards. And like personal credit cards, the rewards earned on a small business credit card can be put towards personal use.

Many small business credit cards offer 2x miles per dollar spent, for example. These miles can be transferred to a person’s personal airline account. Other perks and rewards include, but aren’t limited to cash back options, 2x points for restaurant purchases, frequent-flier miles, and more.

Corporate credit cards, on the other hand, offer cash rebates as the main reward. Unlike small business credit cards, these cash rebates, are usually between 1% – 5% and credited directly to the main corporate account. This means that the perks given by corporate credit cards benefit the corporate entity.

In addition, corporate credit cards provide general perks to card carriers, such as free business travel insurance, free access to airport lounges, and more. These “enterprise perks” are typically not offered by small business credit cards.

Lack of Scalability

Small business credit card accounts are traditionally less scalable than the corporate alternative. The cost of adding additional cardholders can be pricey and the reporting tools offered are best used with a small number of cardholders. Further, small business credit cards require the submission of employee expense reports while company payment cards don’t.

If you expect to have a growing number of credit card users, it’s best to consider opening a corporate credit card account. Corporate credit cards are built to scale with a company, providing robust reporting and that helps with financial controls.

What are the Benefits of a Corporate Credit Card?

We now understand corporate credit cards and the qualifications needed to open a corporate credit card account. However, why do small business owners choose this type of financing option? Specifically, what are the benefits of a corporate credit card?

The 4 primary benefits of a corporate credit card are:

1. Scalable Financial Controls
2. Cash Rebates & Enterprise Perks
3. No Personal Guarantee
4. Lower Annual Fees

Let’s take a moment to discuss each one of these benefits in depth.

1. Scalable Financial Controls

The major benefits of corporate credit cards are the scalable financial controls. These controls save a small business money and save its employees precious time.

Expense reports, for example, aren’t a requirement with company payment cards. Instead, a company can access its own reporting portal where it can track credit card spending in real time. This helps a business better manage operating expenses and provides a powerful analytics solution that’s built to scale larger than other business credit options.

For example, the centralized dashboard keeps track of individual credit cards for a large pool of employees. The data can be consolidated, resulting in more accurate and timely cost analysis when compared to options that rely on employee expense reports.

Similar to other business credit card options, spending limits and frequency limits can be placed on any corporate credit card. This helps with budget management and fiscal responsibility.

Finally, corporate credit cards, specifically company payment cards, can mitigate internal expense fraud. Employees, for example, when filling out an expense report, can doctor receipts or even submit expenses without receipts altogether. It’s easy for these transactions to fall through the cracks, meaning that team members can overstate their expenses and receive a higher reimbursement.

With company payment credit cards, the expense report process is removed, meaning that all credit card transactions are tracked to the correct penny. Employees no longer have the option of committing internal expense report fraud.

2. Cash Rebates and Enterprise Perks

Corporate credit cards offer cash rebates between 1% – 5% of expenses. The specific cash rebate rate depends on the card issuer and the type of expense. Business-specific transactions, such as office equipment or business travel, for example, have higher rebates.

Corporate credit cards also offer enterprise perks that differ from the typical credit card perks. Instead of points and airline miles, for example, corporate credit cards provide employees with business travel insurance, free access to airport lounges, and more.

The idea with the enterprise perks is that they can’t be used for personal reasons and instead directly benefit the small business. Cash rebates are credited directly to the main company credit card account, regardless of if it’s a company payment card or an individual payment card.

3. No Personal Guarantee

Business owners are wary of linking their personal credit to the credit of their companies. This is generally not a requirement with corporate credit cards.

With company payment cards, for example, lending institutions look at a business’s performance and credit rating when issuing a corporate credit card account. Employees and business owners aren’t liable for any corporate credit card activity.

With individual payment cards, however, issuers may or may not hold both employees and business owners responsible for credit card transactions. Individual payment cards often require a soft pull on a person’s personal credit, and some issuers hold both employees and business owners personally liable, while other institutions consider the cards to be of joint liability or company-only liability.

4. Lower Annual Fees

The cost of a corporate credit card is usually between $39 and $100 per card, per year. This is generally lower than what you’ll find with other business credit card options.

Bottom Line

Corporate credit cards can be an excellent financing option for a growing small business to gain more scalable financial controls over their employees’ spending. Efficiencies in reporting will reduce the amount of time the operations team spends reconciling expense reports, too. A corporate credit card program can also reduce a small business owner’s personal liability for their business’s financing.

It isn’t possible to apply for a corporate credit card online. Instead, reach out to your existing relationship banking manager or a new business banking manager who works for one of the institutions, above. They’ll be able to help you with the specifics of a corporate credit card, the requirements for approval, and whether it’s right for your business.

If you don’t qualify for a corporate credit card or just prefer the convenience of being able to order a card online, check out Chase’s business credit cards. The Chase Ink Business Cash℠ Credit Card, offers cash back rewards as well as competitive rates. Also, you can get employee cards at no additional cost and set spending limits for each card.

Apply Now