Corporate and business credit cards are two different things. Corporate credit cards are typically issued to businesses with revenues of several million to billions of dollars, and the company, not an individual, is liable for any nonpayment issues.
Business credit cards are applicable to companies of all sizes, from mom-and-pop enterprises to LLCs with several million dollars in billings. If you’re a solopreneur or small entrepreneur — or you plan to start a small business — a business credit card is for you.
Before you apply for a credit card, explore the details, fees, and pros and cons of corporate and business cards to determine the best one for your needs. Regardless of which type you choose, good rule of thumb is to look for one that helps you save the most money.
What Is a Corporate Credit Card?
A corporate credit card is designed for multimillion-dollar corporations. Unlike business cards, corporate credit cards do not require a personal guarantor. To obtain a corporate credit card, a corporation turns over its tax ID and corporate financial records to the credit card issuer for review.
The corporation remains responsible, rather than a specific individual, for any failure to pay its credit card obligations.
When You Should Use a Corporate Credit Card
Major corporations with hundreds of employees can streamline and monitor employee expenses with a corporate card. Corporate credit cards provide companies with a way to track employee business, travel and petty cash expenses.
For example, a company might have employees who travel frequently on business. If those employees use their own personal credit cards for travel, they would need to complete expense reports and wait for company reimbursement, which could take weeks.
When employees use corporate cards, the company categorizes and analyzes expenses — the employees only need to turn in the original receipts and avoid charging personal expenses on the company card.
Pros and Cons of Using a Corporate Credit Card
A corporate credit card often makes sense for large businesses. It’s important, however, to weigh the pros and cons of these cards before signing up:
- Using corporate credit cards improves reporting and record-keeping.
- Corporations can better monitor and analyze employee spending.
- Corporate credit cards might come with special benefits like travel and emergency assistance services.
- Employees streamline paying for business expenses.
- A dedicated customer service representative is typically a benefit of a corporate card.
- Card costs and fees might outweigh benefits.
- Corporations must ensure employees do not use the card for personal expenses.
- Some lenders run credit checks on employees who receive corporate credit cards.
- Employees lose the opportunity for rewards, miles and other benefits that might accrue when they use their own cards.
Corporate Credit Card Fees and Costs
Corporate credit card fees, charges and interest rates vary by provider and type of card. In general, the spending cap per card is flexible and you can set that up with the card provider.
For example, Capital One offers two choices of corporate cards. One offers a 14-day billing cycle and the other, a 30-day cycle. The annual membership fee is $0 and there is a $19 authorized cardholder fee. Each card offers rebates on purchases and additional benefits. The payment is due in full each month — and you’ll pay a 1.5 percent late fee and a $39 returned-payment fee.
American Express corporate credit cards don’t assess interest charges, have no maximum limits and require that a balance that must be paid in full within 30 days, according to a company representative. Additionally, there is a 60-grace period that is free from interest or fees.
Understanding Business Credit Cards
Business credit cards differ from corporate cards in some key ways. Know the differences so you can determine which card is right for you.
What Is a Business Credit Card?
Many credit card companies offer business credit cards, which are some of the best credit cards for smaller companies. For example, a business credit card might be suitable for a smaller S corporation, LLC or partnership.
You can use a business credit card for a wide range of business expenses — and having one can help a business build a credit history. Liability for late payments or nonpayment is the key difference between corporate and business credit cards: A designated person is responsible for business card payments.
Unlike corporate credit cards that employees use to pay for work-related expenses, owners and employees might use business credit cards for a wider range of business expenses.
When You Should Use a Business Credit Card
Small-business credit cards are useful for helping small- and medium-size companies make business-related purchases. Business owners and employees should use a business credit card to purchase items for work. That way, the firm can separate business and personal expenses. Owning a small business is risky, so entrepreneurs should avoid risking their personal credit on business expenses.
Pros and Cons of Using a Business Credit Card
Business credit cards tend to make sense for smaller businesses but that doesn’t mean every entrepreneur needs a small business credit card. Know the pros and cons of these cards before you apply for one.
- Business owners and employees can buy work-related items and pay off the balance over time.
- The card can help the business develop a strong credit profile, which might help with future capital funding needs.
- It provides spending reports, which can improve record-keeping.
- It will likely offer a higher spending limit than a personal credit card.
- Because of the variety of providers and types of cards, low- or no-fee cards might be available.
- Employers must monitor the card for fraud and misuse.
- It might be subject to a higher annual percentage rate than a personal credit card due to additional perks and benefits.
Business Credit Cards Fees and Costs
Like corporate cards, business credit card costs and fees vary by provider. Applying for a business card does not require any financial documentation, and you can typically complete the application and get approved within five minutes. American Express, for example, offers a card with no fees to businesses that can provide proof they’ve been around for two years.
A business credit card’s interest rate varies based upon market conditions. For example, the American Express small-business charge card, which requires payment in full at the end of the month, has a 30-day billing cycle and doesn’t have interest charges.
Which Is the Right Solution for Your Business?
Unless you’re an employee of a major corporation, small business credit cards are the most flexible and affordable work-related cards. Compare credit cards to find the best business credit card that offers low or no annual membership fees and generous rewards programs.
For instance, Bank of America currently offers a $200 statement credit for specific business cards. In addition, corporate cards tend to be more expensive and are geared toward the largest major companies.
Business credit cards offer a low-fee, high credit limit business solution. The only drawback with this type of card is that an individual is personally liable for any delinquent payments. Regardless of which type of credit card you choose for a business, you’ll have peace of mind knowing the Fair Credit and Charge Card Disclosure Act gives consumers government-mandated protections.
Editorial Note: This content is not provided by American Express. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone and have not been reviewed, approved or otherwise endorsed by American Express.