What is a corporate credit card and how does it work?
Corporate credit cards let employees directly make on-the-job purchases with company funds while also helping employers track expenses and tie out their books.
But doling out the same, no-strings-attached corporate credit card to every employee is risky. It’s also common. According to a recent survey, 62% of company credit cardholders know of instances where corporate cards were misused for non-business purposes.
So how do you administer corporate credit cards while controlling costs and remaining compliant with company spend policies? Read on to learn more, along with what else you need to know about the corporate credit card application process, which businesses qualify, and more.
What is a corporate credit card?
Companies issue corporate credit cards to employees for work-related expenses—like travel, events with clients, supplies, and any other purchases needed on the job. Also known as commercial credit cards, corporate credit cards relieve employees from dipping into personal accounts for business expenses.
And since they’re owned and operated by businesses, standout corporate credit cards let companies manage company spend by setting purchasing restrictions tailored to employee needs.
Who is liable for paying off corporate credit cards?
While businesses own corporate credit cards, different issuers and card types have different liability criteria. In most cases, the default structure is corporate liability—where companies make a “business guarantee,” assuming legal responsibility for paying off balances.
Some cards allow individual liability, meaning employees pay the bill upfront and submit expense reports for reimbursement. In this case, card issuers will check individual employees’ personal credit with a “soft pull,” i.e., not impacting their credit score.
In joint liability scenarios, employees pay for personal or unauthorized expenses and their employer covers all business expenses.
Corporate credit cards vs. business credit cards vs. personal credit cards
Like other credit cards, a corporate card has a monthly billing cycle, credit limit, and rewards perks. But it differs from business and personal credit cards in other crucial ways. Here’s how different card types stack up:
- Corporate credit card: Owned by a business entity and used by its employees. Companies set spending controls and use expense reports to reconcile statements. Corporate cards are reserved for established corporations—C Corps, S Corps, or LLCs—that meet certain revenue criteria (more on this later).
- Business credit card: For small business owners, entrepreneurs, and independent contractors looking to separate business and personal expenses. They’re owned by individuals instead of business entities and typically have higher credit limits and more business-centric rewards programs than personal credit cards. This card often requires applicants to put up a “personal guarantee” to assume debt if their business can’t pay it off.
- Personal credit card: Owned and used by individual cardholders who make a personal guarantee to pay the card off and can use it for any purchase within a pre-set credit limit. Unlike corporate and business credit cards, personal cards are subject to consumer protection laws, like the Credit Card Act of 2009.
Corporate credit card benefits
When properly managed, corporate credit cards help businesses, finance teams, and individual employees. Here are the biggest advantages::
Expense management and reporting
Corporate credit cards eliminate the drawn-out, manual expense reimbursement process that takes significant time for employees to file and managers to approve. Companies can consolidate employee spend and make bulk payments across cardholders instead of one-by-one.
And with the right expense management platform, corporate cards help finance teams better track spending patterns by department, vendor, and types of purchases, allowing them to build high-visibility reports that inform the budgeting process. They can also automatically create expense reports and approve purchases.
Employees, meanwhile, don’t have to front personal funds for business expenses. They can also use company-owned cards with no impact on their personal credit score.
Enhanced financial control and security
Since businesses own and administer corporate credit cards, employers can set customizable spending limits and restrict purchases based on merchant, location, type of transaction, and more—ensuring responsible use across their workforce. Employers can also quickly lock compromised cards and revoke cardholder access to employees leaving the company.
Rewards programs and travel benefits
Most corporate credit cards come with rewards programs like cash back or points on purchases, with special rates for travel, dining, and other business expenses. Employers can choose to pass these rewards off to cardholding employees, so they can, for example, redeem airline miles accumulated on business for personal trips. While this boosts morale and helps companies attract and retain talent, businesses can also choose to keep rewards in-house and use them to save costs down the road.
Choosing a corporate credit card
Most major issuers offer corporate credit cards. Here’s what to consider to choose the right one for your business.
Tailor rewards to purchasing patterns
Different corporate credit cards have different reward schemes. To maximize value, look for options with perks related to purchases your employees make most often. For instance, if you have a large sales team that frequently makes cross-country trips, look for a premium on airline miles or hotel points.
While some cards have blanket cash back across purchases, others have higher perks for procurement, travel and expenses (T&E), or let you designate a specific category of your choosing for extra points.
Spend management tools
Standout corporate credit card solutions don’t just come with a piece of plastic to buy things. Look for platforms that allow a high degree of control over employee spend, letting you set:
- Card groups linked to employee attributes—like level, department, and work location
- Customizable spending rules with spending limits and purchasing restrictions
- Access rules, including role-based permissions over who can see spend reports
To minimize security breaches, also look for corporate credit card solutions that let you choose either physical or virtual cards, depending on the employee.
Time-saving automations
Most corporate cards are siloed from the rest of a company’s employee data. Rippling’s corporate card solution, by contrast, tightly integrates with the rest of your workforce management processes, allowing for automations that save significant time on tedious administrative work. For instance, you can automatically issue cards during onboarding and revoke them during offboarding, tee up hyper-customized policies that block purchases before managers lose hours poring through an expense report during reconciliation, and more.
Applying for a corporate credit card
Corporate credit cards typically have stringent eligibility criteria. As the name suggests, they’re reserved for established corporate entities—S Corps, C Corps, and LLCs—meaning small business owners and sole proprietors should look into a business credit card instead.
While the exact qualifications vary by issuer, businesses typically need a high business credit score, strong annual revenue, 10 or more employees (some issuers set a minimum number of cardholders), and oftentimes credit card charges of $250,000 or more each year.
Some issuers work better for certain company sizes. While some cards only require business to have $75,000 in a business bank account (making it a solid option for startups), American Express requires at least $4 million in annual revenue. Chase’s corporate cards, by contrast, require annual credit card spend of $10 million.
When applying for corporate credit card, expect to provide issuers with:
- Audited financial statements in line with Generally Accepted Accounting Principles (GAAP)
- Supplementary financial documents like bank statements, tax returns, and loan agreements
- Articles of incorporation (and other details about your business structure)
- An Employer Identification Number (EIN) and other tax information
- Business credit reports
- Contact information for an owner, president, treasurer, or other authorized officer
Businesses may need additional requirements, like vendor references, a business address, and proof that the company is at least a year old.
Best practices for managing corporate credit card usage
Once businesses apply for and receive corporate credit cards, they need guardrails to stay within budget and protect against misuse.
Set spending limits and controls
Instead of assigning a one-size-fits-all corporate credit card to your employee base, use past spend data to determine different credit limits for different employees. And if you set initial controls for who can purchase what, employees get blocked from making unauthorized purchases before transactions go through, saving your finance team the hassle of reconciling expense reports that don’t align with company policies—and making it easier to close the books every month.
Monitor corporate credit card statements.
Even if you’ve pre-set controls limiting corporate credit card access, check statements so that even authorized purchases stand up to scrutiny.
Expense tracking and reporting
Build reports breaking down employee expenses by department, job level, and location to see how different employees use corporate credit cards, so you can adjust spending limits and budget for the months ahead.
Also keep in mind that corporate cards are just one pillar of company expenses. The more you can consolidate all of your spend on the same platform—cards alongside vendor bills and payroll—the easier time you’ll have controlling costs now and forecasting down the road.
Managing corporate cards is easier when you can automate as much as possible. Look for cards that come with spend management solutions that let you take manual heavy-lifting out of processes like:
- Setting up approval chains to avoid painstaking reconciliation
- Assigning cards with proper controls during onboarding
- Reminding employees to submit expense reports
Risks to avoid when using a corporate credit card
What happens when you don’t manage corporate credit cards? Employees may make unauthorized purchases—either fraudulently if you have loose controls or even unintentionally if your spend policies are too opaque.
In turn, slipshod corporate credit card management can lead to misuse of company funds, which can dwindle profit margins, cause cash flow issues, and put businesses in debt.
To avoid the pitfalls and reap the benefits of corporate cards, see how Rippling’s all-in-one spend management solution lets you administer, track, and manage employee spending with minimal manual work and full visibility.
Frequently asked questions
What is a corporate credit card?
A corporate credit card is a type of credit card owned by businesses, given to employees to use exclusively for work-related purchases. Companies control which types of expenses employees can make, and employees can make business purchases without fronting personal funds or impacting their credit score.
Who is eligible for a corporate credit card?
Corporate credit cards are reserved for established corporations—C Corps, S Corps, and LLCs—with a proven track record of annual revenue and (typically) a workforce of at least 10 people. Exact eligibility criteria varies by issuer.
Which corporate credit card is best?
Different corporate credit cards have different spending limits, annual fees, interest rates, and rewards programs. While the best card for your business depends on your size, purchasing patterns, and financial profile, standout solutions come with other spend management features that let you set customize limits and automate reconciliation.
Is it hard to get a corporate credit card?
To obtain a corporate credit card, eligible businesses need to provide financial statements, tax forms, and other business documents. Applicants that don’t meet annual revenue requirements or have too few employees will likely get denied. Small business owners and sole proprietors should look into business credit cards as an alternative.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
