The Difference Between Business and Corporate Credit Cards

Corporate and business credit cards sound like very similar products, but they are actually fairly different. Until the CARD Act of 2009, business cards were virtually identical to personal cards. Your business card might have the name of your business above your own name, but other than that, it was just a way to separate your business from your personal card, or just get another sign up bonus.

Almost every traditional card is offered as a business card as well, but following the CARD Act, they are now very different from personal cards. A large loophole was written into the CARD Act that exempted business cards from most of the law’s provisions.

So Then What Is a Corporate Card?

A corporate card is an entirely different product. While a business card can be obtained by anybody who tells their bank they are a business, a corporate card is marketed toward businesses with multiple employees.

There are two types of corporate cards: Cards that are the responsibility of the employees and cards that are paid by the corporation. If the card is the responsibility of the employee, each card holder must pay his or her own bill and submit expense reports to the company for reimbursement. If the card is paid by the corporation, an employer will still demand reimbursement from the employee for any personal or unapproved charges. Like the business card, the corporate card is also exempt from the consumer protection provisions of the CARD Act.

Advantages and Disadvantages of a Business Card

When a person has a business credit card, it allows them to separately track and pay for their business expenses. If they have to carry a balance on either their personal card or their business card, they could still pay off the other in full every month, avoiding interest from being incurred on every transaction. Many people will apply for a business card in addition to a personal card when there is an exceptionally generous sign up bonus offered.

The disadvantage is clearly the exception from CARD Act protections. For example, double cycle billing is still employed, fees are not capped and interest rates can rise more easily. It is important to know what you are getting into if you plan on using a business card.

Advantages and Disadvantages of a Corporate Card

Not every bank offers a corporate card. They are typically only offered by larger banks to customers with an existing banking relationship. When the employees are responsible for their own payments, there is little advantage to using it over their own personal card. The company gets to choose the card and can utilize the statements to track company expenses. Employees must also be extremely careful if their company may become insolvent. Since they are responsible for the charges, there have been cases where an employees has been forced to pay for expenses incurred on behalf of their now bankrupt company.

If a company pays for the card, then it must track it’s expenditures closely to ensure employees do not abuse the card for personal for fraudulent expenditures. In such a situation, employees are taken out of the loop in regards to getting reimbursements and making payments on time. This works well when employees are unable to obtain credit on their own or have difficulty managing their finances.

Another advantage for the company, and a downside to the employee, is the company may retain all points, miles or cash back rewards. I pity the employee who is forced to travel regularly, yet enjoys few of the benefits of the spending. Likewise, many executive assistants and meeting planners are able to earn impressive credit card rewards when they charge reimbursed expenses to their corporate or business cards that they are personally responsible for.

Understanding the distinction between business, personal and corporate credit cards will allow both employees and employers to select the right product for their particular needs.