What Is a Corporate Charge Card?

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Companies use corporate charge cards so that workers can charge approved business costs, such as hotel stays and flights, without relying on their own credit cards or cash.

Usually, a business card bears the name of a corporation and the name of the employee identified as the cardholder. Broadly speaking, a corporate credit card is intended for a company with annual sales of millions to billions of dollars. 

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In contrast, a corporate credit card is designed for a business of any size, including a small business or a single entrepreneur. Read on to learn more about corporate charge cards.

What Is a Corporate Charge Card?
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How it Works

An employer can offer a corporate card to some workers to pay for approved business costs, such as hotels, meals, rental cars, and flights, and access cash at ATMs, all without using their own funds or an advance from the company. 

In addition to the employee’s name as a designated cardholder, the company’s name will be on the card. The employee’s signature goes, just as it does on a personal credit card, on the back of the card.

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Types of Corporate Credit Cards

The employee or the employer may be responsible for paying the credit card charge, depending on the kind of corporate credit card

The employee is responsible for paying the credit card issuer directly for any transactions on an individual liability card, making an expense report, and receiving a refund from the employer. 

Before issuing them a visa, the credit card issuer reviews the employee’s credit, but it’s a “soft tug” that won’t change their credit score. The employer pays the bill for any accepted fees if it is a corporate liability card. 

Although, the employee might be on the hook to pay the issuer directly for any unwanted or personal expenses. The credit card issuer will usually not check the employee’s credit because they are responsible for paying the bill. 

Employees May Be Responsible

Still, the person will likely be responsible for filing daily expense reports so that the company can reconcile the card statements each month.

They can determine who is liable to pay the bill per month before an employee uses a corporate credit card. They should set up a system to ensure that payments are on time and have the funds on hand to cover the balance if they are liable.

Benefits of Corporate Credit Cards

A primary benefit of a corporate credit card is that it makes it easy for workers and employers alike to handle expenses. A corporate card allows employers, from a business viewpoint, to impose restrictions on how much cardholders can spend per purchase.

Where a card may be used, the business may also regulate, restricting transactions to particular vendors, types of merchants, and locations. 

A corporate liability card can mean financial relief from an employee’s point of view, as it removes the need to pay for business-related expenses in advance and then wait for repayments. 

Another advantage is that some corporate credit cards have electronic expense reporting that automatically populates company expense reports with purchase details. This function makes it easier to file timely and accurate information.

How Companies Handle Corporate Credit Cards

What Is a Corporate Charge Card?

To avoid making errors that might lead to accounting nightmares or worse, workers should know their business’ rules surrounding corporate cards from the get-go. 

Cardholders should become acquainted with their organization’s general spending and reporting requirements and find out if they have spending caps that apply to those categories. It is also necessary to learn about any rules unique to the department or role. 

For instance, company managers are likely to have different spending profiles. When a cardholder knows the policies of their firm, they should adhere to them. 

If they use their card to purchase anything that is not an approved business cost, it may make them look bad in their employer’s eyes, even if it’s an innocent mistake.

Conclusion

If the use of corporate credit cards has an upside, it is the opportunity for businesses to keep workers informed that they are being watched. 

Employees should handle their corporate credit card with respect, just like any other credit card, and keep it in a secure position to avoid fraud or damage. It should be reported as soon as possible if a card is lost or stolen to be canceled and replaced.

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