Corporate vs business credit card: Key differences to know
Both business credit cards and corporate cards are both great options to help your business manage its cash flow, build business credit, avail of special credit card rewards, and more.
However, a choice between the two can be a tricky one to make. Several factors such as company size, type, eligibility, expected spending, and others need to be taken into consideration. Some of these cards come along with tools as well, like expense management software, the features of which can also play a part in guiding your decision.
Depending on your business’ needs and capacities, choosing between the two must only be done after forming a thorough understanding of the fundamental differences between the two.
Cards that owners and particular employees use to manage and pay for business expenditures like bills, supplies, travel, etc. are called business credit cards. Like personal credit cards, these cards also come with benefits, perks, and cashbacks.
The rewards that business credit cards come with, however, are usually also larger and more lucrative because of the simple fact that companies spend more.
Corporate credit cards are used by businesses with bigger spending requirements than those using business credit cards. These companies usually need to have high annual revenue levels that range around the $4 million mark.
The company is also often required to have a minimum number of cardholders for it to be eligible to hold corporate credit cards. This is because these cards also allow more holders than business credit cards.
The two cards are essentially quite similar concerning the fact that they both serve a similar purpose. The most distinctive point of difference is in terms of what scale your company is functioning at.
While business credit cards can be used by businesses of all sizes it is a better idea to move to a corporate credit card if your business is relatively larger and still growing. Besides this, there are differences with regards to eligibility, liability, and others which will be discussed below.
Corporate credit cards have a strict list of requirements that need to be met before they can be issued. Corporations typically need to meet or exceed about $4 million in annual revenue, have a minimum number of employee cardholders, and meet a spending quota.
The organization also needs to have a high business credit score. Before final approval, providers may also request you to hand in the company Tax ID and ask to conduct an audit.
Business or small business credit cards, on the other hand, have relatively more relaxed requirements. They can be obtained by any business organization, regardless of their type. Moreover, these cards come without the need to qualify criteria such as employee count, revenue generated annually, or spending budget.
However, because business credit cards are issued against personal guarantees the owner needs to have a good credit score. Above 700 is good but it’s best if your score is ranging above or around the 800 mark.
If your company is growing and the rate at which you spend is increasing alongside the amount you spend you should consider applying for a corporate credit card. To elaborate, you should apply for a corporate credit card if your company’s annual revenue has consistently been over USD 4 million.
Another factor to consider is the spending quota and minimum number of cardholders that card companies mandate before issuing a corporate credit card. If your company is working with a large number of employees who regularly have to make purchases on behalf of the company then you can definitely apply for a corporate credit card.
Business credit cards for small businesses require a personal guarantee wherein the main account holder is made responsible for all debt. Only the business owner and no other individual is due to appear for credit checks. So, before applying for a business credit card you need to ensure that you as the owner, main account holder, have a high credit score, preferably around the range of 800.
For a corporate credit card, on the other hand, personal liability on behalf of the company owner is not required. Instead, it is the enterprise itself that is made liable and therefore must also have a high business credit score. Employee cardholders can also share liability, in which case they might have to undergo credit checks and be made responsible for wrongful expenditure.
The way both corporate and business credit cards are used daily tends to change because of the differences in liability, even though both types of cards essentially serve the same purpose. Sole liability credit card users will use their business or corporate account to keep track of transactions. On the other hand, you’ll need to use an expense reporting procedure if you’re using shared liability corporate cards.
Both business, as well as corporate credit cards, are equipped with limit-setting features for individual cards. However, with corporate cards, you can get a greater degree of control. Many such cards come with inbuilt analytical software, such as accounting and tracking facilities, which can reduce the cost and time spent on expense management.
Small business credit cards are more cost-effective than corporate credit cards. All that’s needed usually is one annual flat fee with no extra or hidden costs for additional cards. Corporate cards, however, tend to demand high annual fees and can also charge for individual cards.
As already mentioned, business cards don’t require extra costs for additional employee cards. However, additional corporate card issuances do exist and can be quite high, ranging around the $100 mark.
While business credit cards don’t usually have a bar set for the number of cards issued, corporate cards normally require a minimum of 10 to 15 cards to be used for the company to be eligible.
Corporate credit cards usually come with intricate expense management software. This software allows you to issue multiple cards and at the same time track, and set customizable limits on spending.
Business credit cards for small businesses can also be issued to multiple employees with facilities to set spending limits, however, the tools available to manage the same allow much lesser control.
For small business credit cards, the APR does vary, depending on the issuer, but the average rate falls around 15%. Some business credit cards do have 0% APR available, although this might only be provided for a limited period. Corporate credit cardholders don’t have to worry about APR. Because all payments are required in full by the end of the billing period the need for APR is eradicated.
Some small business credit cards charge an annual fee, but many are entirely free to use. Even those that do charge fees are usually limited to less than $100. On the other hand, corporate credit cards tend to charge higher fees. This is because of the fact that corporate credit cards offer a host of other features alongwith those that small business credit cards provide.
Like personal credit cards, both corporate and small business credit cards have rewards systems in place. The difference lies in the fact that business cards tend to offer more rewards, cashbacks, and discounts than corporate cards. While at the same time, corporate cards do also provide a much better customer service experience.
Rewards are a key selling point for business credit cards. You can avail exclusive discounts from partners, frequent flyer miles, redeemable points as well as individual rewards for employees.
Corporate cards, in contrast, have a lesser focus on rewards. Even for users with joint liability for repayments, most corporate cards do not accommodate the accumulation of points or rewards. However, corporate cards do have much better, personalized customer service systems in place.
For instance, corporate card providers assign dedicated relationship agents who work round the clock, collaborating with clients and sorting out any obstacles they might encounter. Because corporate credit card accounts hold larger amounts and tend to be more complex than small business credit cards, this level of service is crucial.
Business credit cards are available to all types of companies, including sole proprietors and gig workers. In contrast, corporate cards are only available to corporations, to be precise, to those that are C-Corp, S-Corp, and some LLCs.
It’s clear by now that you should choose a corporate card only if your company brings in at least $4 million in annual revenue and has sufficient employees to utilize the card. Otherwise, your best bet would be a small business credit card.
Again, similar to the revenue criteria, the spending requirement of your business must also be at a very high level if you are considering a corporate card. Business credit cards, on the other hand, are best suited to smaller enterprises with lower spending requirements.
If the number of employees using the credit card is anything less than 10-15 you should consider the business card. In case the number is higher a corporate card is the best option.
You should consider moving to a corporate card only if you have a significantly higher volume of business transactions to account for. If not, a business credit card makes a lot more sense given.
If more features, a greater degree of control over spending and allowances, and visibility are what you’re looking for, corporate cards are your go-to. While business credit cards also allow setting spend limits the features and controllability they come with are far less promising.
The options at your disposal when choosing either a corporate or a business credit card are plenty. Depending on your needs and preferences you can make an informed choice that is best suited for your company. However, of all the options available some are worth considering over and above the rest. The industry’s newest, most exciting addition, Volopay, makes a very solid case in this context.
With Volopay you can issue both virtual as well as physical cards. As we continue to shift towards a more digital life virtual cards are only going to have an even bigger role to play. Ease-of-use, customization, and personalized control via expense management tools are all reasons why you should move to a corporate card that offers both virtual and physical options.
Another benefit that comes with Volopay’s virtual card is that you no longer have to worry about the high costs associated with issuing new corporate cards to your employees. Volopay lets you issue an unlimited number of cards depending on your needs.
Volopay’s virtual cards and smart expense management software help you and your company manage subscriptions with ease. This is especially useful if you run a tech company or any other business that requires regular subscriptions to third-party software or services.
The expense management software that comes with Volopay is truly one of a kind in terms of the extent to which you are given control. You can set precise spending limits for each employee card, manage those limits and get immediate notifications whenever there is any breach of the same.
Transactions and setting budgets to cards that require multi-level approvals are also accounted for. The control factor is even more developed because of this multi-level approval system. You can assign approval authority at multiple levels to particular employees in charge of your finances and never have to worry about irregular or unauthorized spending ever again.
Volopay offers its clients a credit line without the need for personal guarantees whenever you need one. All you need to do is reach out, state your requirements and help our teams audit and work out a plan that works best for you. We process the credit request instantly, unlike traditional banks.
Having state-of-the-art, cutting-edge, software at your service has its perks. One of the many being able to track, report and analyze your card expenses in real-time. Real-time reporting and tracking give you great visibility on the current, live status of your spending without having to wait a full month to analyze. Make faster, more informed decisions with the information available in real-time.
Nobody likes having to choose between multiple favorites. With state-of-the-art software integration capabilities, Volopay’s corporate cards automatically sync with your pre-existing accounting software without any fear of data loss or corruption. Seamlessly transition into a far more advanced service without losing out on the perks of your original favorites.
Our partnerships are a great asset to us. Volopay’s services work borderless and in an international environment. Not only do you not need to worry about the hassle of international payments, but you can also even earn cashback of up to 2% on every FX transaction using our corporate cards.
Last, but not least, Volopay’s corporate cards do not require personal liability on the company owner or the employees’ part. The point of liability is held by the company, therefore eradicating the need for personal liability.
It is highly recommended for businesses to switch to a corporate card the moment operations start scaling up beyond a certain point. Generally speaking, this point is to be determined by the annual revenue your business generates, i.e. if your business is turning an annual revenue that is upwards of $4million you should definitely switch to a corporate credit card.
Apart from annual revenue there are other factors as well that can serve as indicators for making the switch. For instance, if your spending quota has gone above the point where it can be managed easily you should switch to a corporate credit card. This is because corporate cards often come with spend control dashboards and other such services that can help you manage increasing spending.
In the business credit card vs corporate credit card debate which one is the best option for you will be determined by your organizational requirements. The corporate credit card, for instance, is better for companies that are larger in size, typically those that have upwards of $4 million in annual revenue.
These cards also often come with the requirement of minimum number of cardholders. The business credit card, on the other hand, is best suited for smaller businesses because neither does it have any particular level of revenue required nor does it mandate any minimum number of cardholders.
Virtual cards will be much easier for business owners, and it helps you to keep your data more secure.
With corporate credit cards, businesses can manage their accounts and track expenses more efficiently.