What are corporate cards, and does your business need them?

5 minutes
Business tips
What are corporate cards, and does your business need them?
In this article

When you run a business, making purchases and payments are inevitable. After all, as the trite saying goes, you’ve got to make money to spend money.

When you’re in the early stages of your business, or if you’re a relatively small operation, using your own cash or credit card can be enough for you to rely on. If you’re diligent you can stay on top of your invoices, keep your receipts, make your payments on time, and track your spending accurately.

But as your business grows, so too do your payment needs. The volume of payments you’re making will increase. There are more requirements, more levels of financial reporting required, and you can easily lose oversight of your spend.

While you may have the necessary financial roles in place to manage your funds, it’s inevitable that it starts to become a much more complex process.

This is where a corporate card can become a viable option for your business.

So what is a corporate card?

A corporate card is a payment card, typically a credit card, that’s issued to employees of a business to use in their day-to-day role for work-related expenses. They provide an avenue for employees to make purchases and spend money on behalf of the company without having to use their own funds and get reimbursed later.

Corporate cards provide businesses with a way to monitor their spending more efficiently. They can be controlled to the degree that when set up properly, they’re only available to be used for certain types of purchases. For example, travel expenses, or spending related to hosting an event.

How does a corporate card differ from a regular credit card?

The spending and debt features work in the same way. But a corporate card isn’t just any old credit card. 

Your corporate card is opened through a bank, and you have to go to the specific banking unit that deals with their corporate card program. Visa’s corporate card service, for example, is available through all the big banks, and they provide you with the name and contact details for the specific person that deals with these cards. So it’s not your average banking service.

There’s also the issue of liability. For a small business owner using your own credit card, you’re responsible for the debt incurred. For a corporate card, while the employee is using the card, the business foots the bill. This effectively protects the individual against any liability that comes with non-payment of the debt.

Does my business need a corporate card program?

Whether or not you need a corporate card program will depend on the size of your business.

If you’re a sole trader or a small business, then no, a corporate card program won’t be appropriate for your level of spend or income.

But as you get bigger, your turnover continues to increase, and the levels of financial reporting involved in your business’ financials get deeper, then a corporate card program may become a sensible option.

However, there are a few things you should be aware of before you make this decision.

  • Check your fees first. Depending on the number of employees in your business, the annual fee per card can quickly accumulate and outweigh the potential benefits.

  • Foreign exchange. If you spend a lot in overseas currencies or make a high volume of purchases in foreign currencies, this can also get expensive.

But more on these later.

What are the benefits of corporate cards for businesses?

As well as providing credit facilities to improve your business’ cash flow, corporate cards provide your business with a number of benefits.

  • Flexibility. A corporate card program is ideal if your staff need to make regular payments under their own initiative and you want to reduce the paperwork and red tape involved in making these payments. A corporate card empowers your staff to easily pay for business expenses themselves without the need for drawn-out sign-off procedures. It also gives them a sense of ownership over their budgets and responsibility over their spending. 

  • Improved tracking. Each corporate card has a clear payment trail, so it’s easy to track spending back to individuals. Your employees know that their spend is being monitored, so while there’s a responsibility and ownership, there’s also that knowledge that whatever they spend will be easily traced back to them. This provides a good level of protection against fraud, as you know exactly who should be using the card, and when, and any instances outside of these parameters can be identified easily. 

  • Enjoy the other benefits. Your business as a whole can enjoy the benefits associated with credit cards. This can include things like earning reward points of frequent flyer program points with your spend, or membership to particular travel clubs or to international hotel chains. These rewards can then be used back within the business to go towards future flight or travel expenses, or used as employee incentives. You can also make use of credit card bonus features like travel insurance, or emergency assistance.

Curious about virtual cards? Click here to read more about the benefits of virtual debit cards.

What are the fees involved with corporate cards?

In almost every corporate card program you can expect to pay an annual fee for using the service. Then, you’ll generally pay an extra annual fee per card issued to an employee. These fees vary wildly depending on the bank and the service and can be anywhere from $39 per card to almost $300 for a premium, rewards-driven corporate card service.

Then there’s the interest. Corporate cards are usually credit-based or charge cards, meaning as per a regular credit card, there’s going to be interest charges if the outstanding debt isn’t paid back within the set timeframes. This interest rate can range from 12.65% to almost 18% depending on the issuing bank.

On top of this, you’ve got charges for international transactions, foreign currency spend, and poor FX rates. If you’re doing a lot of business with international suppliers, these fees will very quickly add up.

Luckily, there’s a low-cost alternative to corporate cards

Airwallex Borderless Cards are your alternative to the typical Visa corporate card you see around.

Borderless Cards are a multi-currency virtual card, meaning there’s no physical card required. They’re free to create, and once your business account is up and running you can create cards instantly. You don’t even have to wait for the card to be delivered to you—You can start using it on Apple Pay or Google Pay™️ straight away.

You can create as many cards as you need, each one assigned to individual staff members or projects. They’re debit cards, too, so there’s no risk at all of racking up large business debts.

There are no annual fees, absolutely no foreign transaction fees, and you get access to FX rates that are up to 90% better than those of the big banks. You can also make international payments in 23+ currencies, opening your business up to a world of opportunity.

You can also switch on expense management features to keep track of your Borderless Card expenses, control employee spend proactively and save everyone some time. If that doesn't cheer your team up, we don't know what will.

Eliminate your foreign transaction fees with Airwallex Borderless Visa Cards

Book an online demo with us today to find out how our Borderless Cards can save you big—and replace your Visa corporate card for good.

Related article: 3 ways to secure your business from employee expense fraud

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