What is a Corporate Credit Card: Definition, Types, and Benefits

121 what is a corporate credit card definition types and benefits

What is a Corporate Credit Card?

Corporate credit cards are a valuable financial tool that offer numerous benefits to businesses of all sizes. These cards are issued directly to a corporation rather than an individual, allowing the company to distribute them to employees for work-related expenses. By streamlining expense management and providing robust reporting and controls, corporate credit cards can help businesses save time and money while gaining better oversight into their spending.

Definition of a Corporate Credit Card

A corporate credit card is a type of credit card that is issued to a corporation or business entity, rather than an individual person. The corporation itself is liable for all charges made on the card, and the card is primarily used for business expenses such as travel, entertainment, and procurement.

Companies must typically meet certain criteria set by the card provider to qualify for a corporate credit card program. This may include a minimum annual revenue threshold, a demonstrated financial track record, and a commitment to maintain a certain level of spending on the card.

How Do Corporate Credit Cards Work?

Corporate credit cards work by allowing companies to issue cards to their employees, who can then use them to make work-related purchases. Common expenses charged to corporate cards include:

  • Travel expenses like airfare, lodging, and ground transportation
  • Entertainment expenses for client meetings or team events
  • Procurement and business-to-business expenses for goods and services

When an employee makes a purchase with their corporate card, that transaction data feeds into the company’s accounting systems and ERPs. This provides real-time visibility into spending and more efficient reporting and reconciliation.

At the end of each billing cycle, the company makes one consolidated payment to the card issuer for all of its cardholders’ charges. In some scenarios, companies may choose to be billed separately for each individual cardholder’s spend.

By integrating card transaction data directly into a company’s ERP, corporate card programs can dramatically reduce administrative tasks, paperwork, and errors. They also minimize the risk of fraud and abuse by eliminating the need for a drawn-out reimbursement process.

Types of Corporate Credit Cards

There are several different types of corporate credit cards available, each designed to meet specific business needs and expense categories. The four main types are:

All-In-One Corporate Credit Cards

All-in-one corporate cards provide a single solution for managing all types of business expenses, from travel and entertainment to procurement and everyday spending. They eliminate the need for businesses to juggle multiple cards for different purposes.

One example is J.P. Morgan’s One Card, which offers robust and versatile all-in-one features. Businesses can use it to cover travel, client meals, office supplies, and everything in between.

Purchasing Cards

Purchasing cards, also known as procurement cards or P-cards, are corporate credit cards that are ideal for everyday business expenses and procurement needs. Employees can use them to purchase goods and services to support the company’s operations.

J.P. Morgan’s Purchasing Card, for instance, is designed for expenses like equipment, office supplies, and other day-to-day operating costs. It offers enhanced data capture and real-time transaction monitoring to help businesses track and control their procurement spend.

Travel and Entertainment Cards

Corporate travel and entertainment (T&E) cards are specifically designed to provide oversight and management of employees’ spending on things like flights, hotels, rental cars, client dinners, and other travel-related purchases.

Products like the J.P. Morgan Corporate Card offer features tailored to T&E expenses, such as airline miles, travel insurance, and detailed spending reports. This allows companies to monitor compliance with travel policies and simplify the reconciliation process.

Virtual Cards

Virtual corporate cards are digital-only cards that aren’t physically printed or issued. They allow businesses to generate unique card numbers for specific online transactions, providing an added layer of security and control.

With the J.P. Morgan Virtual Card, for example, the company can generate and send a single-use virtual card number to a vendor for a particular purchase. The company can set custom criteria for each transaction, such as a spending limit, expiration date, or authorized merchant category code.

Virtual cards also help companies automate their accounts payable processes and make it easier to track and manage their online spending in real-time.

Benefits of Corporate Credit Cards

Corporate credit cards offer a range of benefits to businesses that can help them streamline their expense management, reduce costs, and gain greater control and visibility into their spending. Some of the key advantages include:

Time and Cost Savings

One of the most significant benefits of using corporate credit cards is the time and money they can save businesses. By consolidating expenses onto a single card and automating much of the reconciliation process, companies can dramatically reduce the administrative burden on their finance teams.

Corporate cards also allow businesses to take advantage of lucrative rewards programs, earning cash back, points, or miles on their spending. Some cards even offer additional perks like travel insurance, airport lounge access, or discounts on business services.

Robust Reporting and Controls

Another key benefit of corporate credit cards is the powerful reporting and control features they offer. Most programs provide detailed, real-time transaction data that integrates directly with the company’s accounting systems and ERPs.

This allows finance teams to easily track and categorize expenses, monitor compliance with spending policies, and quickly identify any suspicious or fraudulent charges. Corporate cards also offer customizable spending limits and approval workflows to help prevent misuse.

Control Feature Benefit
Spending limits Prohibit employees from charging beyond a certain amount
Merchant category restrictions Restrict purchases to approved categories like travel or office supplies
Per-transaction limits Require additional approvals for expenses over a certain threshold
Real-time alerts Flag suspicious transactions for immediate review

Streamline Expense Management

Perhaps the greatest benefit of using corporate credit cards is how significantly they can streamline a company’s expense management processes. By shifting from a traditional reimbursement model to a card program, businesses can:

  • Reduce expense report paperwork and processing times
  • Eliminate the risk of fraud and abuse in the reimbursement process
  • Gain real-time visibility into spending as it happens
  • Ensure greater policy compliance and control over employee spending
  • Simplify accounting and auditing with electronic transaction records

All together, this leads to a faster, more accurate, and more efficient expense management workflow, which can mean major time and cost savings for the business.

Corporate Credit Cards vs Business Credit Cards

While the terms “corporate credit card” and “business credit card” are sometimes used interchangeably, there are actually some key differences between these two types of cards. Understanding these distinctions is important for businesses trying to decide which card program is the best fit for their needs.

Key Differences Between Corporate and Business Credit Cards

The main differences between corporate and business credit cards come down to eligibility, liability, and ownership:

Corporate Cards Business Cards
Ownership Issued to the corporation itself Issued to an individual person
Liability The company is liable for balances The cardholder is personally liable
Eligibility Based on the company’s financials Based on the individual’s credit
Ideal for Mid-size to large corporations Small businesses and sole proprietors

In general, true corporate cards are only issued to larger, well-established corporations with significant revenues and transaction volumes. The company itself owns the cards and is liable for all balances.

Business credit cards, on the other hand, are geared more toward small businesses, startups, and even sole proprietors. They’re issued to an individual person who is personally liable for the charges, even if the card is used exclusively for business spending.

When to Choose a Corporate vs Business Credit Card

So given these differences, when does it make sense for a company to use a corporate card program instead of just having employees put expenses on their personal business cards?

As a general rule of thumb, corporate credit cards are the better choice for:

  • Mid-size to large corporations with substantial annual revenues
  • Companies with a large number of employees incurring business expenses
  • Businesses that want tighter control over employee spending
  • Organizations looking to streamline expense management and reporting

Smaller businesses, sole proprietorships, and startups, on the other hand, may find that a business card program is sufficient for their needs and easier to qualify for. The key is evaluating your company’s specific spending patterns, expense management challenges, and growth trajectory.

Implementing a Corporate Credit Card Program

If your business has decided that a corporate credit card program is the right solution for its needs, the next step is to start the process of implementation. This involves first carefully evaluating different card programs and then establishing the right internal policies and controls to manage the cards effectively.

Assessing Your Company’s Needs and Capabilities

Before diving into a corporate card program, take the time to thoroughly assess your company’s unique needs and spending patterns. Consider:

  • How many employees need cards, and with what spending limits?
  • Which expense categories will the cards be used for?
  • Do you need different types of cards for different spending needs?
  • What specific card features and benefits are most important?
  • How well-equipped is your finance team to manage a card program?

It’s also important to evaluate the potential financial impacts of a corporate card program, both in terms of costs and possible savings or rebates. Make sure your accounting systems are able to handle importing and categorizing card transaction data.

Selecting the Right Corporate Credit Card Provider

There are many different corporate card providers out there, each with their own unique features, integrations, and rewards structures. Some of the key things to look for when comparing options include:

  • Robust expense management and reporting tools
  • Ability to set custom spending controls and limits
  • Seamless integration with your accounting software
  • Comprehensive fraud prevention and detection features
  • Attractive rewards programs and complimentary perks

Consider providers that can scale with your business over time and that offer a variety of card types to meet your evolving needs. Be sure to also examine the fees involved and evaluate your company’s ability to meet the card issuer’s eligibility requirements.

As the largest issuer of commercial cards in the U.S., J.P. Morgan offers a robust lineup of options for businesses of all sizes. Companies can work with J.P. Morgan’s team of payments experts to select the card program that best fits their current and future needs.

Best Practices for Managing Corporate Credit Cards

Finally, to really maximize the benefits of a corporate card program, it’s critical to put the right policies and practices in place to manage the cards responsibly. This includes:

  • Creating detailed usage policies outlining when and how employees can use their cards
  • Setting sensible spending limits based on each cardholder’s role and responsibilities
  • Establishing clear approval workflows and expense reporting deadlines
  • Educating employees on proper card use and policy compliance
  • Using card management tools to monitor transactions and quickly flag anomalies
  • Regularly auditing expense reports and card statements to prevent abuse

By being proactive about corporate card management, businesses can harness the full power of these programs to save money, boost efficiency, and make smarter decisions about their spending.

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