What are corporate credit cards and how do they work?

It’s the ideal scenario for a small-business owner: Your company is experiencing year-over-year growth, your business is profitable and your revenue increases every quarter. This is the kind of growth most small-business owners dream of.

When you start to see your company shift from a small startup to an established corporation, it’s time to think about transitioning your financial tools. This might mean switching from a business credit card to a corporate credit card — but before you begin the lengthy corporate credit card application process, it’s worth asking yourself whether a corporate card is really the right choice for your business.

Let’s take a closer look at how corporate cards work, how to manage a company card and how to decide whether your small business is ready to make the transition from a business credit card to a corporate credit card.

What is a corporate credit card?

A corporate credit card is a type of card issued to a corporation. This means that the business entity, not the business owner, is legally responsible for all charges made on the card. Because of this, corporate credit cards are generally only issued to large companies with a track record of success and an established business credit history. If your business is an LLC, S-Corp or C-Corp with a solid business credit score and revenue in the millions, your company might be eligible for a corporate credit card.

Corporate credit cards may come with certain beneficial perks, such as cash rebates and frequent flyer miles. However, the biggest benefit to a corporate credit card is that individual employees can be issued their own cards to handle their work-specific business expenses. Whether it’s paying for plane tickets or renting office space, having a corporate credit card can make handling business expenses for a large corporation much more efficient.

How do corporate credit cards work?

In many ways, corporate credit cards function a lot like personal credit cards or small business credit cards. You can use your corporate credit card to make purchases for your business, and many corporate cards allow your business to earn rewards on corporate purchases. Your business will need to make regular payments on your corporate credit card account, and your corporate card usage and payment history will factor into your business credit score.

However, corporate credit cards also come with several features that small-business credit cards may not offer. These include the ability to issue employee credit cards without having to assume personal liability for the charges. Corporate credit cards also often include access to accounting software and services designed to help your business manage its corporate line of credit, and your company may receive discounts on common business expenses and retailers.

Corporate credit cards vs. small-business credit cards

Corporate credit cards and small-business credit cards are not one and the same. While corporate credit cards are designed for corporations with multiple employees and revenue in the millions, business credit cards are designed to meet small-business owners’ needs, including freelancers and those with side hustles. Knowing which option is best for your business will help you apply for the right card — and having the right line of credit is a great way to help your business grow.

Which option is right for you?

If you have a side hustle, run a freelance business or have a small business with revenue of less than a million dollars per year, you’ll probably want a business credit card. Business credit cards have a lot of advantages, including the ability to earn rewards on business expenses and build your business credit score. If you have employees who need access to your business line of credit, you can make them authorized users on your business credit card.

Business credit cards also require a personal guarantee, which means you are personally liable for any charges made on the account (including authorized users’ charges). If your business does not bring in enough money to pay off your business credit card bill, expect to make payments out of pocket.

If your small business is legally classified as a corporation, has revenue in the millions and has multiple employees who need access to a corporate credit account, it might be time to consider a corporate credit card. Corporate cards do not require a personal guarantee, so it’s a good idea to make sure your business has built up a solid credit history before applying.

How do you qualify for a corporate credit card?

To find out whether your business will qualify for a corporate credit card, contact a corporate credit card issuer directly. Unlike consumer credit cards, corporate credit cards often include lengthy application processes — and you may be required to provide documentation proving that your business’ income and expenses are high enough to justify taking out a corporate line of credit. The application may even include a financial audit, so be prepared.

Can you get a corporate credit card with bad credit? Technically, yes. Since corporate credit cards don’t require a personal guarantee, a credit issuer probably won’t do a hard inquiry on your personal credit. This means that you could have a low personal credit score and still have your business qualify for a corporate credit card. On the other hand, if your business has bad credit or has only developed a limited credit history, you might have a harder time taking out a corporate line of credit.

What are the best corporate credit cards?

The best corporate credit cards are the ones offering flexibility, rewards and expense tracking your business requires. It also enables you and your employees to pay for the materials and supplies you need while getting rewarded for it. Typically these types of cards require full payment of the balance every month,which keeps you from accruing interest but could create some cash flow issues for more fledgling companies. Here are a few Bankrate’s recommendations for the best corporate cards:

• Brex Card*

  For a corporate card with no annual fee, the Brex Card offers substantial incentives for business owners who have the ability to make daily payments. Although you’ll need a Brex business checking account with a consistently high balance to qualify, its generous welcome offer, built-in expense management and high reward rates for daily payments make it a great option for business owners with positive cash flows.

• Ramp Visa® Corporate Card*

  Instead of adjusting your spending to earn higher rewards categories, you can earn an unlimited 1.5 percent cash back on purchases with the Ramp Visa Corporate Card. Much like the Brex Card, you’ll also have built-in expense management to help simplify your expense reporting, compliance and spend controls. Ramp is slightly more flexible with 30-day payment terms, but you still won’t be able to carry a balance.

• Amex Corporate Platinum, Gold or Green

  American Express is a leader in the corporate card space. The issuer offers corporate card options for a variety of business budgets including the Corporate Platinum Card®*, Corporate Gold Card* and Corporate Green Card*, all of which earn Membership Rewards points and feature varying benefits. Each also offers access to a robust expense management system and employee cards.

  Amex encourages card members to pay all balances in full each month, however, there is a Pay Over Time feature on each of these corporate card options which may provide more flexibility during months where cash flows are constricted. We provide more details on each of the cards in the American Express® Corporate Program below:

  • Corporate Green Card: The Corporate Green Card has a $75 annual fee, which is at the lower end for their business card selections. It offers 3 percent Uber Cash on eligible rides and orders with Uber and Uber Eats. Cardholders also enjoy Hilton Honors Silver status (Enrollment required for some benefits)
  • Corporate Gold Card: With a slightly higher rewards rate and hefty annual fee of $250, the Corporate Gold Card offers 5 percent Uber Cash on eligible Uber rides and Uber Eats orders as well as Hilton Honors Silver status and a $100 airline fee credit annually with a preselected airline. (Enrollment required for some benefits)
  • Corporate Platinum Card: At $550 per year, the Corporate Platinum Card offers the most valuable perks among these three cards. Earn the 5 percent Uber Cash on eligible rides and orders and take advantage of airport lounge access, a $189 credit per calendar year for Clear Plus membership and a $200 annual airline fee credit with a pre-selected airline. (Enrollment required for some benefits)

Tips for managing a corporate credit card

Corporate credit cards come with more perks, but they also come with more factors to manage. To begin using your corporate credit card wisely, you should:

Establish policies for all cardholders

When you open a corporate credit card, be ready to talk to your employees about your company’s new credit card policies, as well as how to use their company cards. Ensure that employees understand that they should only make business purchases on the card, as well as the importance of keeping up with payments and tracking receipts.

If you’re an employee using a corporate credit card on behalf of your employer, the best way to manage your company card is to follow the guidelines set by your employer — and make sure to submit all receipts, expense reports and other necessary documentation promptly. If you have any questions about how your corporate credit card should be used, talk to your manager or reach out to a team member in accounting or finance.

Monitor and manage expenses

Managing funds for large corporations takes work, but most corporate credit cards come with high-level expense reporting tools that can make that work a little easier. Whether you want to track expenses by category, monitor employee spending or reallocate your budget in real-time, the best way to manage your corporate credit card is to take full advantage of these tools.

And if your business is large enough to have a corporate line of credit, it’s probably large enough to have an accountant (or accounting department) who can help you understand where your business’ money is going, whether you are staying within your budget and what you need to do to keep your corporate line of credit in good standing.

The bottom line

Many successful small-business owners may wonder whether it’s time to transition from a business credit card to a corporate credit card. If your business has a team of employees, a solid credit history and — most importantly — annual revenue in the millions, it might be time to consider applying for a corporate line of credit. If your business is doing well but isn’t yet hitting that kind of revenue, a small-business credit card is still probably your best option.

Issuer-required disclosure statement:

*The information about the Brex Card, Ramp Visa® Corporate Card, Corporate Platinum Card®, Corporate Gold Card and Corporate Green Card has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.