What is a corporate credit card and how does it function?

If you run a small business, you’re likely aware of business credit cards. However, if your company is thriving, it may be time to explore corporate credit cards.

What sets them apart? How can you determine if a corporate credit card is suitable for your needs? Read on for insights and answers to these questions.

What defines a corporate credit card?

A corporate credit card is linked to a corporate account instead of an individual. This means that the business entity assumes legal responsibility for all transactions made with the card, not the business owner.

Typically, corporate accounts are reserved for businesses with an annual revenue of $4 million or more, along with a proven track record and a solid business credit history. If your business is an LLC, S-Corp, or C-Corp with a strong business credit score and significant revenue, you may qualify for a corporate credit card.

Many corporate credit cards offer benefits such as points, miles, or cash back. However, the primary advantage of a corporate credit card is that it allows individual employees to have their own cards for managing work-related expenses.

Comparing corporate credit cards to small-business credit cards

The main distinction between corporate cards and small-business cards lies in who holds responsibility for the debt and fees. With small-business cards, the primary cardholder is personally accountable; conversely, with corporate cards, the liability falls on the company.

Next, let’s consider rewards. For small-business cards, the primary cardholder collects rewards. However, with corporate cards, the company typically retains the rewards, and the earning rates are often less favorable than those found on many small-business cards.

If employees currently charge business expenses to their personal cards and later seek reimbursement, the transition to a corporate card where the company receives the rewards might feel like a significant loss of benefits for some employees.

How do corporate credit cards impact personal credit?

In summary, no. Corporate credit cards do not require a personal guarantee, meaning a credit issuer is unlikely to perform a hard inquiry on your personal credit file. This allows you to have a low personal credit score while still qualifying your business for a corporate credit card.

Conversely, if your business has bad credit or a limited credit history, obtaining a corporate card will be more challenging.

How to obtain a corporate credit card

If you're looking to acquire a corporate credit card, you typically need to reach out to a card issuer directly. Unlike personal credit cards, corporate credit cards often involve lengthy application procedures that require documentation of the business’s income and expenses. Your business may even undergo a financial audit.

Conclusion

While small-business owners might be acquainted with business credit cards, corporate credit cards are better suited for companies with annual revenues exceeding $4 million, a proven success record, and an established business credit history.

A corporate credit card is linked to a corporate account, which means that the business entity assumes legal responsibility for all charges made on the card, rather than the business owner. If your business is substantial enough to warrant a corporate card, it could be beneficial for protecting yourself from personal financial liability.