What is a corporate card? Guide for your business spending

Key takeaways:

• A corporate card, also known as a commercial card, offers flexibility and security for completing business transactions with multiple cardholders.

• Corporate credit cards are available to large, established companies with significant revenue, whereas business cards are a better fit for smaller, individually owned businesses.

• Companies can obtain various types of corporate cards, ranging from virtual multi-currency cards to purchasing cards for everyday expenses.

When you run a business, making purchases and payments is an inevitable part of the process. After all, you’ve got to spend money to make money.

Using your own cash or credit card can be enough in the early stages of business, but ideally, you should find a solution that can supercharge your startup’s growth and help you manage funds.

As your payment volume increases, so do your needs for financial reporting. Over time, you could lose oversight of your spend. 

This is where a corporate card for business expenses can streamline your business payments.

What is a corporate card?

A corporate card is a payment card, sometimes a credit card, that employees receive to use in their day-to-day role for work-related expenses. All transactions are tied to the business entity rather than specific employees or owners.

These cards allow employees to make purchases and spend money quickly and efficiently. Purchases are made on behalf of the company without employees having to use their own funds and get reimbursed later.

Corporate cards also enhance transparency, allowing businesses to monitor their spending more efficiently. You can even set them up to limit purchases to certain categories. For example, travel and entertainment cards might only allow travel expenses or spending related to hosting an event.

Types of corporate cards

Corporate cards can have unique benefits or features to help you manage spending or rack up rewards to support your business. You can even adjust liability depending on your needs. 

• Individual liability cards: These cards name a specific employee responsible for paying the card debt. Ultimately, they’re repaid from the business’s funds, but the employee is the card’s owner. As the card owner, they’re subject to a credit check and are personally responsible for unpaid bills.

• Virtual cards: Not everyone needs a physical card to make purchases, and a benefit of virtual cards is that they’re ready to use as soon as they’re opened. You can easily manage spending online, share payment information with your team, and complete international transactions with a business debit card. 

• Purpose-driven cards: If your team travels frequently for meetings or events, a travel and entertainment card may be a good choice to cover hotel stays and client dinners. If you need to cover daily expenses, a regular payment card is great. Cards designed for specific needs can help streamline spend management. 

Compare card features, your business needs, and fees to choose the best corporate card for your business. 

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

The spending and debt features work similarly, but a corporate card isn’t just a typical credit card. Opening the card itself requires additional steps, and the business entity is responsible for the card and the purchase, rather than any individual.

A bank usually issues a corporate card, and you must visit the specific banking unit that handles 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 of the specific person who deals with these cards. So, it’s not your average banking service.

There’s also the issue of liability. Small business owners who use their own credit cards are individually responsible for the debt incurred, which can negatively impact their credit score. 

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.

What are the benefits of corporate cards for businesses?

In addition to providing credit facilities to improve your business’s cash flow, corporate cards provide your business with many benefits.

Flexible access to spending

A corporate card programme is ideal if your staff need to make regular payments on their own 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 lengthy approval processes. It also gives them a sense of ownership over their budgets and responsibility over their spending. 

Improved tracking for transparency and security

Each corporate card has a clear payment trail, making it easy to track spending back to individuals. Your employees know that the business is monitoring their spend, so while there’s responsibility and ownership, there’s also that knowledge that whatever they spend will be easily traced back to them. 

This tracking provides a good level of protection against fraud, as you know exactly who should be using the card and when, and you can easily identify any instances outside of these parameters. 

Rewards and other benefits

Your business can enjoy team benefits with credit cards, including reward points or frequent flyer programme points with your spend, or membership to particular travel clubs or international hotel chains.

Your business can claim these rewards or put them towards future flight or travel expenses or employee incentives. You can also take advantage of credit card bonus features, such as travel insurance or emergency assistance.

Does my business need a corporate card program?

Whether or not you need a corporate card program likely depends on the size of your business. Larger, well-established corporations with significant spending are the most eligible for corporate cards and reap the most benefits. 

If you’re a sole trader or a small business, a corporate card programme won’t be suitable for your level of spend or income.

But as your business grows and turnover increases, your financial reporting might become more complex. In this case, a corporate card may be a sensible option.

However, there are a few things you should be aware of before deciding on a corporate credit card:

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

• Review the card’s foreign exchange rates. If you spend a significant amount in overseas currencies or make a high volume of purchases in foreign currencies, this can also become expensive.

Fees are inevitable, but there are ways to reduce the cost of a corporate card.

What are the fees involved with corporate cards?

You can expect to pay an annual fee for using almost any corporate card service. Then, you’ll generally pay an extra annual fee per card issued to an employee. These fees change depending on the bank and the service. They can range from CAD $39 to almost CAD $300 per card for a high-end, rewards-based corporate card service.

Then there’s the interest. Corporate cards are usually credit-based or charge cards. Like a regular credit card, they have interest charges if you don’t pay back the debt within the set time limits. Depending on the issuing bank, this interest rate can range from 12.65% to almost 18%.

On top of this interest rate, there are fees for international transactions, foreign currency spend, and foreign exchange. If your business operates internationally, these fees can very quickly add up. It’s a good idea to compare business bank accounts and card services to get the best deal. 

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

Corporate cards are extremely beneficial to your business, but you’re not stuck with the big banks’ high fees. Airwallex Corporate Cards are your alternative to traditional corporate cards.

Corporate Cards are multi-currency virtual cards, meaning you don’t need a physical card to make purchases. They’re free to create, and once your business account is up and running, you can create cards and begin spending instantly.

There are no annual fees, absolutely no foreign transaction fees, and you can save up to 80% in FX fees compared to those offered by the big banks. You can also make international money transfers in 23+ currencies, opening your business up to a global market of opportunities.

You’ll also get expense management software to keep track of your Corporate Card expenses, proactively control employee spending, and save everyone some time. If that doesn't cheer up your team, we don't know what will.