What Is a Corporate Credit Card?

Corporate credit cards are credit cards issued to employees of established companies that let them charge business expenses—such as hotel stays and plane tickets—without having to use their own cards or cash. These cards, which are also known as “commercial credit cards,” can make it easier for employees (and employers) to manage expenses, and many offer perks such as frequent flier miles and access to airport lounges.

How a Corporate Credit Card Works

Corporate credit cards are designed to meet the needs of established companies—typically those with at least $4 million in annual revenues, 15 or more card users, and projected charges of $250,000 or more each year. While most businesses, including sole proprietorships, can get a small-business credit card, corporate cards (as the name implies) are reserved for corporations. This means the company must be structured and registered as a C corporation, an S corporation, or a limited liability company (LLC).

Most major credit card issuers, such as American Express, Capital One, J.P. Morgan Chase, Citibank, and Wells Fargo, offer corporate credit cards. Approval for the cards is based on the applying company’s financial health, not the owners’ personal finances. For example, card issuers may require the company to have strong financials and good liquidity and cash flow.

Corporate credit card issuers typically want to see a company’s recent audited financial statements; details about its structure and organization; tax information, including an employer identification number (EIN); credit reports and ratings; and contact information for a company officer who is authorized to do business on behalf of the company, such as an owner, a president, or a treasurer.

The company’s name will be on the card along with the employee’s name as a designated cardholder. The employee’s signature goes on the back of the card, just as it would on a personal credit card.

Types of Corporate Credit Cards

Depending on the type of corporate credit card, either the employee or the employer may be responsible for paying the credit card bill.

With an individual liability card, also known as a “personal liability card,” the employee is responsible for paying the credit card issuer directly for any charges, after which they can file an expense report to obtain reimbursement from their employer. The credit card issuer will check the employee’s credit before giving them a card, but it’s a “soft pull” that won’t affect their credit score. However, once they receive the card, their credit score could be impaired if they fail to make payments on time.

If it’s a corporate liability card, the employer pays the bill (although the employee may be on the hook for any unauthorized or personal expenses). Because the company is responsible for payment, the credit card issuer typically won’t check the employee’s credit, but that person will likely be responsible for filing regular expense reports, so the company can reconcile the card statements each month.

Card agreements that make the company, rather than an individual, responsible for any charges to the card are referred to as having a “business guarantee.” This is most common with corporate cards, while small-business cards may require a personal guarantee from the owner or other key figure.

Benefits of a Corporate Credit Card

A key advantage of a corporate credit card is that it makes it easier to manage expenses for employees and employers alike. From a business perspective, a corporate card allows employers to place limits on how much cardholders can spend per transaction, per spending category, or overall. The company can also control where a card can be used, limiting purchases to specific merchants, types of merchants, and locations. In addition, corporate cards provide useful records for tax purposes.

From an employee viewpoint, a corporate card eliminates the need to pay up front for business-related expenses and then wait for reimbursement. Another benefit is that some corporate credit cards offer electronic expense reporting that automatically populates company expense reports with purchase information—a feature that makes it less of a hassle to submit timely and accurate reports. Another major perk is that, depending on the employer, cardholders may get to keep any rewards they earn while using a corporate credit card. They may, for example, be able to earn and redeem rewards for an airline’s frequent flier program or a hotel’s frequent guest program. Of course, the employer may decide to keep the rewards for its own purposes. Still, many larger companies allow employees to reap the benefits of rewards programs, as doing so can improve employee morale.

In addition to rewards programs, many corporate credit cards offer other benefits that frequent travelers will appreciate, such as access to airport lounges (a huge plus if a traveler has a long layover), travel and emergency assistance services, emergency card replacement and cash disbursement, and car rental collision damage waivers.

Cardholders will want to read the fine print on the credit card agreement to be sure they understand how these benefits work. To activate auto coverage when renting a car, for instance, you probably have to complete the entire transaction with the covered credit card and decline the rental company’s collision damage waiver. When in doubt, call the number on the back of the card.

Company Policies for Corporate Credit Cards

Companies that make corporate cards available to employees typically have a written policy—or an entire manual—regarding their proper use. Employees should try to follow these rules from the get-go to avoid making mistakes that could lead to accounting nightmares or worse. This means familiarizing themselves with the company’s general spending and reporting requirements and finding out if there are any spending limits that apply to certain categories.

Once a cardholder learns their company’s policies, it’s best to stick to them. If they use their card to buy something that’s not an approved business expense, it can make them look bad in the eyes of their employer, even if it’s an honest mistake. What’s more, many large companies have a travel and entertainment card manager on staff who can audit employees’ expenses at any time. Before a corporate credit card is activated, an employer may offer (or require) in-person or online training sessions designed to help employees learn the policies. In addition, an employer may post and update policies on its internal website. It’s always a good idea to stay informed, follow the rules, and avoid doing anything that could result in extra paperwork or be construed as fraud. Cardholders who have questions about their employer’s policies should contact the person (or department) that manages the program.

The Bottom Line

Before an employee uses a corporate credit card for the first time, they should find out who is responsible for paying the bill each month. If they are responsible, they may want to set up a system to ensure that their payments are on time (such as email alerts) and that they have the funds on hand to cover the balance until they are reimbursed. Employees should treat their corporate credit card with care and keep it in a safe place to prevent theft or loss, as they would with any credit card. If the card is lost or stolen, they should report that as soon as possible, so it can be canceled and replaced.