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

What’s different between a corporate credit card and business credit card?

Businesses of all sizes require different types of credit cards to meet their needs, and it’s important that company owners understand the distinctions between them.

Corporate credit cards differ from small business credit cards in their requirements, benefits, and utility. Businesses can ensure they are getting the best financial fit for them by getting a better understanding of how each works.

How does eligibility work?

There are strict requirements for a business to qualify for a corporate credit card account. Companies will typically need to have annual revenue above $4 million, a minimum of $250,000 in annual expenses, and at least 15 authorized cardholders to be approved.

The business will also need to have a good credit score. If a company meets all these requirements, then they will be required to submit their Tax ID and undergo a financial audit before approval.

Business owners that do not meet these thresholds can apply for a small business credit card instead. These are available to companies of all sizes, and even sole proprietors, regardless of how long they’ve been operating.

The application process for a business credit card is much more straightforward, and it’s unlikely that an audit will be required. Business credit card applicants need to provide some information on their business, such as their tax identification number. They will also need to have a good personal credit score and offer a personal guarantee.

How liability works

The company owner has sole liability for a small business credit card by offering a personal guarantee, and are held responsible for all repayments. Issuers will also check their personal credit score and will report account activity to the major credit bureaus under their name.

Authorized cardholders will not be subject to credit checks, but can see their credit affected by activity on a small business credit card.

Businesses can share liability for corporate credit cards across all authorized cardholders or hold sole liability. Employees will be required to pay for transactions made on their corporate credit cards and submit expense reports for reimbursement in the case of shared liability.

While individual cardholders may be held responsible for repayments, any delinquencies or defaulted debts on a corporate credit card only count against the company and not employees or the owner. This means that cardholders are unlikely to see their credit affected unless they become delinquent on credit card debt with shared liability.

Issuers may also run personal credit checks on authorized users, although the effects of these are minimal and temporary.

How usage works

While corporate and business credit cards effectively work in the same way, the differences in liability can change their day-to-day usage. Companies with sole liability credit cards will cover all transactions made on the corporate or business account. Shared liability corporate credit cards will require the business to implement an expense reporting procedure.

Both corporate and business credit cards allow users to set limits on individual cards, but corporate credit cards give a greater level of control. Many feature built-in analytical tools, such as accounting and tracking options, which can reduce cost and time in expense management.

How costs work

As all payments are required in full by the end of the billing period, corporate credit cardholders do not have to worry about APR. Business charge cards operate in the same way, and charge no interest. Other business credit cards can have 0% APR offers, although these may only be available for a limited period.

Business credit cards that do allow customers to carry balances forward can offer greater flexibility for companies needing to cover large expenses. However, these will have varying rates of APR, with the average being around 15%.

In general, small business credit cards are lower cost than corporate credit cards. Typically, they have just one annual flat fee, and there is usually no extra cost for additional employee credit cards. In contrast, corporate credit cards can charge up to $100 per employee card, with many imposing a minimum of 15 cards per account.

How the rewards and benefits work

Small business credit cards tend to have better rewards, although many corporate credit cards still offer some type of rewards program. These credit card rewards can include points which are redeemable at participating retailers, frequent flyer miles, cash rewards, and exclusive discounts.

One advantage for small business credit card users is that they can earn individual rewards. Corporate credit card users are unlikely to be able to keep the points or rewards they accumulate, even if they have joint liability for repayments.

Despite having less of an emphasis on rewards, corporate credit cards do tend to offer a higher quality of service. One example is their dedicated relationship agents, who are responsible for liaising with customers to resolve any account issues. This additional support is critical for corporate credit card accounts, as they tend to be more complex than small business credit cards.