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5 min read 01.11.2021 52

What Are Corporate Cards and How Do They Work?

As small businesses start, they opt for a business credit card which is very useful for small businesses. However, if your company has gotten more prominent, it is time to switch to a corporate card. Before you dive headfirst into the long process of applying for a corporate card, you should be sure that a corporate card is what is right for your business at the moment. 

Ibrahim Busari
Ibrahim Busari
Ibrahim is a fintech writer at AskWallet

Fact checked! This material is written by an expert

5 min read 01.11.2021 52

Many small businesses do not need a corporate card as their size doesn't command the need for one. To qualify for Visa Corporate Card or MasterCard Corporate Card, your company must be legally established as a corporation. The business must have a positive credit score and some other requirements. 

Now let us explore how corporate cards operate, how to handle a company card, and how to determine whether your small business is ready to switch from a business credit card to a corporate credit card.

What is a corporate credit card?

The term "corporate credit card" can mean slightly different things to different people. Technically, a corporate credit card is a particular type of credit card account that's issued to a corporation rather than an individual representing a business. But generally, a corporate credit card is what you might call the card that an employee receives as an authorized user on a business owner's credit card account.  

With those possible definitions out of the way, let's go over some use cases and tips for corporate cards. Two types of corporate credit card relationships are attainable for the vast majority of the business community. The main distinction is whether or not employees must pay for the purchases they make. First, we have authorized employees, and small business credit cards allow company owners to designate employees as authorized users on the corporate account. 

The primary account holder can also set custom spending limits for each employee and earn rewards on their spending. But the primary account holder has to foot the bill, too. Authorized users aren't legally responsible for making payments. So if you own a business, be sure to set your employees' credit limits at amounts you're comfortable paying. 

You should also establish clear policies about when the card can be used and what, if any, purchases the employee must repay the company for. The second situation involves employee reimbursement. Many companies allow employees to use their credit cards for work-related spending and submit expense reports for review and reimbursement. This is the best arrangement if you're an employee.

How do corporate credit cards work?

Corporate credit cards work similarly to personal credit cards or small business credit cards in many respects. You may use your corporate credit card to make purchases for your company, and many corporate cards allow you to earn points on corporate expenditures. Your company will be required to make monthly payments on your corporate credit card account. Your company's corporate card usage and payment history will be factored in towards your business credit score.

On the other hand, corporate credit cards have several advantages that small company credit cards do not. These include the ability to provide staff credit cards without personally being liable for the costs. Corporate credit cards frequently offer access to accounting software and services geared to assist your firm in managing its corporate line of credit, as well as savings on typical business costs and merchants.

What is the difference between a corporate credit card and a regular business credit card?

Now, let's first talk about the similarities between business credit cards and corporate credit cards: 

  • First of all, they're both revolving sources of funds. You can use them anywhere if the payment networks like Visa, MasterCard Discover or American Express are accepted, and you get access to a preset credit limit.
  • You can borrow against your card when you pay down the principal, and the credit becomes available to you again to use over and over again.
  • You don't have to pay the balance in full. 
  • Both cards can be added to Apple Pay and Google Pay. 
  • Employees credit card 

Now, let's look at the significant differences between corporate credit cards and business credit cards: 

  • Corporate credit cards are traditionally for larger businesses, with at least four million dollars coming in every year. 
  • Unlike business credit cards that rely on your personal credit to qualify, a corporate card solely depends upon your business's credit.

Conclusion

There are many advantages to a business by getting a corporate credit card. However, you have to make sure that your business is ready for one. Having a corporate card will help you get the best possible rewards for every type of transaction you will be making. Also, a corporate card makes it easier to separate your personal credit from your business credit card. 

To find the best credit card for your business spending, Check out AskWallet's editors' top picks.

Ibrahim Busari
As a fintech writer at AskWallet, he uses his metaphorical pen to guide you through the world of EMIs. He has been working in the financial and iGaming industry since 2016.