Corporate Credit Cards vs Business Credit Cards
Abid Salahi
•8 min read
You probably know that personal credit cards are meant to cover personal expenses only. Many people confuse that business credit card and corporate credit card is the same and even use the terms interchangeably thinking that they refer to the same credit card. But in reality, there is a significant difference between the two cards.
In simpler terms, business credit cards are issued to small-scale businesses which can include sole-proprietorship, partnership, small business, and small to medium enterprise (SME). However, as the name refers, the corporate credit card is issued to corporations working in the business world at a higher level. Although in broader terms, both credit cards are used to satisfy the business needs, our critical analysis will show you the significant differences between the two.
Let’s unveil the major differences between these two credit cards. It will get you acquainted with the usage of both credit cards.
Comparison of Corporate Credit Cards vs Business Credit Cards
1. Eligibility criteria
The criteria to qualify for a business credit card are much simpler. In Canada, you need to have a good credit score along with a fine credit history to apply for a business credit card. If you have a startup then your finances play an important role in landing a business credit card but the scrutiny is simpler in comparison to the corporate credit card. With a valid personal guarantee and a working taxation identification number, you are good to go for a business credit card. It doesn’t require any hard-core scrutiny like a business audit.
For corporate credit cards, the eligibility criteria are comparatively tough and strict. To apply for a corporate credit card you need to own a huge business corporation with a high credit score. The criteria can vary from bank to bank or credit card issuer to credit card issuer. However, the general prevailing criteria in Canada require you to have an annual revenue of more than $4 million. In addition, you are required to have at least $250000 annual expenditure and at minimum 15 authorized users. Along with these financial and card number requirements, you might also be asked for a financial audit of the corporation as a security check before approval.
2. Liability to pay back the debt
Liability refers to the obligation to pay back the outstanding debt on your credit card.
As for business credit cards, the owner is the one who is held liable for repayment. Mostly, business credit cards are issued against the personal guarantee of the owner which makes him/ her (or them in case of a partnership) liable for clearing the amount due. Even if you have authorized users who have been using the business credit cards then they won't be liable for any outstanding penny, rather the entire liability stays on the owner of the business. Although the authorized users won't be liable the card activity will be shared by Equifax and TransUnion with credit card companies in Canada. This activity will become a part of their financial record and can affect their credit score as well.
For corporate credit cards, the corporation might choose to have sole liability or can share it with the employees as well. For the shared liability scenario, the employees are required to pay back the credit card bill after they have used it. After that, they can reclaim the bill by submitting it to the corporation for reimbursement. Then only after checking the legitimacy of transactions, the corporation reimburses the amount to the employee. Although the corporation wants the employees to pay the outstanding bill the corporation is still liable in case of default or missing payments. This is because the real liability stays with the company and not the individual using the credit card. In the case of shared liability, if the cardholder (of employee card) pays the bill on time and gets reimbursement then there won’t be any effect on his/her credit score. But in case of a default account, the cardholder will also see an effect on his/her credit score and credit history.
3. Centralized control on credit card spending
With business credit cards, you don’t have any centralized control over the spending. As you are most likely using the credit card yourself and if you fail to keep checking and maintain the spending limit then you are likely to fall under huge debt. It gets even more complicated with authorized users as their reckless spending can cause you financial trouble because it is you who is liable at the end of the day.
In contrast, the corporate credit card offers centralized control over credit card spending in Canada. This is because the corporation has the right to set credit limits for the employee cards. The centralized control gets even better with the shared liability agreement. With such an understanding of shared liability, the employees are bound to prove that all expenses incurred are legit after which they are reimbursed. This way the central authority or power to control spending lies with the Corporation or company.
4. Customer service
For business credit cards, you won't get active customer service from the credit card issuer or bank. What does active customer service mean?
It means having a personal credit card assistant in case you need help resolving issues. Of course, if you contact the credit card issuer for any query they will answer that and resolve your issue but after following the due process which may take considerable time.
As for the corporate credit cards, often a relationship agent is designated especially for the corporate who stays in touch with the corporate team. This dedicated agent develops an effective liaison with the corporate team to guide them, resolve issues, answer queries, and extend the needed support. The complex nature of corporate credit cards requires active assistance from credit card issuers which can be quite helpful.
5. Rewards and benefits
The rewards and benefits are the silver lining of getting a credit card. The rewards and benefits program can vary from bank to bank and also according to the card type you are choosing. You can enjoy many attractive rewards and benefits on business credit cards. All cardholders including co-borrowers or authorized users can enjoy the perks of the rewards and benefits. You can choose the credit card that offers the most relevant benefits or can even negotiate a bit with the credit card issuer. The usual rewards offered on such cards include free miles, redeemable points, discounts on eateries, travel benefits, insurance benefits, cashback, and other such offers.
For corporate credit cards, many issuers do offer such attractive rewards and benefits but they do not attract the users as such. This is because even if they earn the rewards they are most often reverted to the company account and cannot be enjoyed by the employees holding the employee corporate credit card. This is because the corporation wants the employees to use the cards within a specified limit for business purposes only. If they allow them to enjoy the rewards and benefits then they can be lured to earn more reward points by overspending on the credit card. Some corporations even go to the lengths that they get a no-reward credit card to keep the employees away from such attraction.
Better expense tracking
With a business credit card, generally you can specify the credit limit but the expense tracking may not be necessarily in an advanced level. You can also track expenses but on a very preliminary or basic level without much information.
In comparison, the corporate credit card comes with a much better expense tracking method. It includes extensive transaction reporting whereby you can see the whole information about every transaction. You can also integrate the employee credit card record with accounting software whereby you can categorize the payments for easy expense management and reporting. This way it becomes easier to report the spending and get approvals in case of reimbursement. Some corporations can also turn on the alerts for certain transactions upon which the employee card doesn’t work. Such alerts can also be used to make sure that the employee doesn’t use the credit card once the credit limit is met.
In addition, the corporation has the right to flag certain transaction that does not match with company policy. This way they can maintain an upper hand over employees that they should comply with corporate policies.
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