What is a corporate credit card?

Individual Liability vs. Corporate Liability

There are two types of corporate cards, the main difference being who is eligible and responsible for paying off the credit card debt.

1. Individual Liability Cards - This card puts the onus on paying off credit card purchases on the individual card-holding employee. The employee reports their expenses and waits for the company to process and reimburse those charges. Credit card issuers will ask for the employee's personal credit score before approving a corporate card, although personal credit scores will not be affected by purchases made with a corporate card.

2. Corporate Liability Cards - Credit card payments are the responsibility of the company in this case. The funds to pay off this corporate card debt are taken from the company bank account rather than the individual employee's. However, employees still need to report their expenses made with this card. To qualify for corporate liability cards, credit card issuers check the employer's credit score before issuing employees cards. 

Prepaid & Virtual Corporate Cards

Unlike traditional credit cards, prepaid cards have a spending limit based on a money balance pre-determined by the cardholder. The card can be refilled and reused as many times as needed, with a static set of credit card details. 

Virtual bank cards are also usually prepaid with a balance or limit determined by the cardholder, however, they're created online for one-time or recurring use. This makes them widely accessible compared to any physical card and reduces the risk of fraud or hacking. 

How do corporate credit cards work?

Without corporate cards, employers rely on individual employees to charge business expenses to their personal cards, and then write expense reports for reimbursement. Corporate cards take out the middleman’s responsibility and streamline the process. 

Corporate credit cards are an essential tool for startups to large companies, where expenses and spending occur on a daily basis across different teams, often in different locations according to the business needs. 

With all-in-one spend management solutions like Spendesk, each employee can receive their own card, whether it's a virtual or physical company card. 

Key benefits of corporate cards

Organised Finances & Cashflow

Separation of personal and company finances is important. This goes without saying for large enterprises and organisations but is especially crucial for scenarios like sole proprietorship, where small business credit cards can help business owners with a tight cash flow better manage their expenses. 

Using corporate cards also reduces the number of individual credit card accounts that are used for company expenses. 

Smarter Expense Management

With corporate cards, business owners retain control and visibility of the company budget and expenses. They determine employee eligibility as card users, whether to issue individual liability or corporate liability cards, as well as credit limit and any usage restrictions of their corporate cards.

Spend management services like Spendesk help streamline employee expense reimbursement and eliminate time-consuming paperwork like expense reports, invoices, and consolidating card statements.

Flexible Employee Spending 

With individual corporate cards, every employee has the freedom and accountability to make their own financial decisions. As with personal credit cards, there is a wide choice of corporate credit card issuers: Visa, Mastercard, American Express, etc.

Benefits for finance teams

There are many incentives for companies to use corporate cards. One of the main benefits for finance teams is greater control and visibility over employee spending limits and overall business expenses. 

Instead of communicating finance guidelines or approving expenses over email or private chat, these processes can all be standardised with a corporate card system. Even better, managers can customise corporate credit card policy as needed. 

Using corporate cards with a spend management platform helps managers:

• Monitor and understand business spending across different departments in real time.

• Tackle admin work like expense management and expense reporting with ease.

• Reimburse employees for company purchases in a timely manner.

Benefits for employees

The greatest benefit of corporate cards for employees is no doubt an expedited process for business expense management as a spender. With corporate cards, employees can:

• Avoid the arduous process of reimbursement for business expense charges using personal credit cards. 

• In the case of corporate liability cards, eliminate surprise or recurring business charges to their own cards and ensuing negative effects on their personal credit score.

Depending on the card provider's rewards program, employee cardholders can also benefit from perks like no annual fee, travel points and airport lounge access, cash back, special discounts, etc.

Ready to reap the benefits of implementing employee debit cards at your company? Book a demo today or try out Spendesk's employee debit cards and all-in-one spend management solution.