Business credit cards and corporate credit cards are short-term business financing options. Not only do they provide companies – and their employees – with quick access to capital and increased cash flow, but they also generally offer rewards programs, perks, and other benefits like supplier payment tools. However, not all businesses are eligible for corporate cards, and each business card type has its own unique requirements. Understanding the differences between business credit cards and corporate credit cards can help business owners understand which card type is right for their needs.
What is a Business Credit Card?
A business credit card is a credit card that allows business owners or authorized employees to pay for company expenses, from office supplies and utility bills to travel and dining expenditures. Business credit cards usually allow cardholders to earn points or cash back rewards for eligible purchases. They work similarly to personal credit cards, but lenders typically offer higher credit limits and more lucrative rewards because businesses tend to spend more.
Who is a Business Credit Card for?
Business credit cards are available for companies of all ages, employee sizes, and revenues. This includes sole proprietors, gig workers, and freelancers. The application process is generally straightforward but does require a credit check and proof of business ownership. Business credit cards often require a personal guarantee, meaning the business owner is personally liable for all debt even if the business goes under. Additional card members, employees authorized to use the card, usually aren’t subject to a credit check.
What are the Benefits of a Business Credit Card?
Responsible business credit card use can help companies build a business credit history that will be useful for future borrowing. To help stay on top of spending, some business credit card issuers provide integration with accounting software, and account owners can typically set spending limits on employee cards. Business credit cards also offer increased cash flow and offer businesses with increased financing options.
What Is a Corporate Credit Card?
While even small sole proprietors or partnership businesses can obtain a business credit card, corporate credit cards are generally designed for businesses with higher annual revenues. Corporate credit cards allow more authorized employee cardholders than business credit cards, and card issuers may even require that a minimum number of employees hold corporate cards.
Who is a Corporate Credit Card for?
Eligibility requirements are many and strict compared to business credit cards. As the name implies, corporate credit cards are only available to private corporations, public corporations, and some Limited Liability Partnerships (LLPs) with an already established healthy credit history. Lenders generally expect a minimum spending threshold, and liability typically falls on the corporation instead of the business owner. This means that if the company goes under without having paid its bills, the business owner is not held responsible.
What are the Benefits of a Corporate Credit Card?
Though corporate credit card annual fees are usually higher than business credit cards, they typically offer more robust administrative benefits, such as automated expense reporting features that minimize the burden of manual expense reports and receipt reconciliation. Corporate card programs might also include features like automated bill payment services and real-time spending alerts. Management can usually set spending limits for each employee cardholder and limit spending to specific categories to better manage cash flow.
Like business credit cards, corporate cards usually offer rewards, whether in the form of points or cash back. Rewards can often be reinvested in employees or the business, depending on the card issuer.
What Are the Different Features of a Corporate and a Business Credit Card?
The main differences between corporate and business credit cards lie in eligibility, liability, and features. For example, a company with over 500 employees and complex spending and expense management needs may benefit from utilizing a corporate credit card program. On the other hand, a sole proprietorship or small business with 10 employees, might benefit from the features offered by a business credit card.
Contact your credit card issuer since every credit card issuer will have different requirements.
Is a Business Credit Card or Corporate Credit Card Right for My Business?
Due to having fewer requirements, business credit cards are often the only option for new or small businesses. Businesses are usually only eligible for corporate credit cards if they meet the issuer’s strict set of requirements. While different credit card issuers may have different criteria for corporate card eligibility, some requirements are universal:
Business type.
Corporate credit cards are for corporations – CCPCs, private corporations, public corporations, and some LLPs.
Company size.
Some issuers also require companies to have a minimum of 15 employee cardholders, for example.
Expected activity.
Some credit card issuers require a minimum expected spending quota to approve a business for a corporate credit card.
Once eligibility is confirmed, deciding whether corporate credit cards are the right option for your business can depend on some additional factors, such as:
Number of employees.
If you anticipate having many authorized users on a business card, it may be harder to track and verify expenses. If that's the case, your business might make good use of corporate credit card features like setting spending limits and categories.
High volume of transactions.
Similarly, with business cards, you may have to manually report transactions and expenses. If your business has a high volume of manually reported transactions may compromise expense tracking accuracy. Corporate credit cards usually offer electronic expense filing, which can reduce time and cost in expense management.
Spending limit.
If you’re reaching or almost reaching your business credit card’s spending limit every month, that may be a clear indication that the company is ready to scale up to a corporate credit card.
The Takeaway
Getting a business credit card is a relatively simple process, typically requiring information you have readily in hand. Even very small businesses and sole proprietors can get business cards, and this can give them more flexibility than relying on personal credit cards, especially for startup expenses or stocking up for holiday sales. However, a business credit card may affect your personal credit score, and you can be personally liable for the balance on the card. So, when your business is ready, it may be best to update to a corporate card.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.