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How Do Corporate Credit Cards Work? (Answered)

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Corporate Credit Cards Explained

For millions of professionals, a company card is an essential financial tool when navigating the business world. Many employees see the company card as a perk of professional employment because it provides access to cash and credit to fund all manner of business endeavors.

Companies use corporate credit cards to give employees the option to charge authorized business expenses to their business bank account. Such expenses could include flights, hotel stays, restaurant bills, transportation costs, and other business-related costs.

Corporate cards for employees usually carry the name of the company and the name of the employee designated as the cardholder. In this article, we’ll answer the question ‘what is a corporate card?’ and then discuss the different types of corporate cards, their benefits, and how they work.

What is a Corporate Credit Card?

Corporate credit cards are credit cards given to employees by their employer. These cards allow you to charge authorized business expenses to your company rather than receive reimbursement on a later date. Employees benefit by using corporate credit cards as it means they don’t have to use their own cash for business-related expenses.

These corporate cards are designed to make it much easier for employees (and their employers) to manage and monitor expenses. Many of these credit cards offer lucrative perks, such as access to airport lounges and frequent flyer air miles, as incentives for using their services.

Types of Corporate Credit Cards

There are many types of company cards available for businesses. Depending on which corporate credit card you choose, either the employer or employee is responsible for clearing the credit card bill. 

With individual liability cards, the employee is responsible for paying the credit card issuer directly for any charges accrued. Once paid, the employee must file an expense report for reimbursement from their employer. For these cards, employee credit history is checked before approval. 

Alternatively, with corporate liability cards, the employer foots the bill for any approved charges. As the company is responsible for paying the bill, individual employee credit eligibility will not be checked before their card is issued. 

Before using a corporate credit card, you should find out who is responsible for covering the bill each month. If you are responsible, we recommend setting up a system to automate payments when they’re due. Plus, you’ll need to ensure that you have the funds to cover the balance, even if you’ll eventually get reimbursed.

How Do Corporate Credit Cards Work?

Let’s use the American Express corporate card as an example of how corporate cards work:

Small business owners, entrepreneurs, and large organizations have multiple options when it comes to credit cards. However, the use of AMEX corporate cards is preferred by most of the larger corporations in the USA. American Express provides six different corporate cards, each with its own benefits, offerings, and fees.

So how does the Amex corporate card work? AMEX corporate cards are ‘charge cards,’ which differ from regular credit cards. When you use AMEX, you won’t pay any interest. But, you have to pay off any outstanding balance in full every month. AMEX designed their corporate cards for U.S.-based companies with gross annual revenues of $4 million or more. For this reason, AMEX approval is based upon the creditworthiness of a business instead of relying on an individual employee’s personal credit. 

Once AMEX has approved your company for a corporate card account, you can give copies of the company card to employees and executives. Generally, the Human Resources or finance department deals with authorizing and processing the cards and issuing them to employees and managers. Depending on the terms your business negotiates with AMEX, employees may or may not be liable for credit charges.

Benefits of Corporate Cards for Employees

  • Expense Management

Traditional approaches to expense management can leave employees paying expenses out-of-pocket for lengthy periods. This can have a detrimental effect on retention rates and team morale, especially if there are trust issues around honesty between employers and employees. Corporate cards mitigate this issue by giving automated expense management services and full transparency on all transactions. 

  • Reduced Expense Fraud and Increased Compliance

If it’s evident that an individual member of the team has been faking their expenses, a corporate card can end this fraudulence. The finance team will have complete details for all transactions, putting an end to the possible expense loopholes that your employees have been abusing. This can be great for team morale as all employees will know that they are being treated equally and fairly.

Get a Business line of Credit Approved Today

Here at L3, we can help you access a business line of credit to support corporate credit cards and manage company spending.

A business line of credit (LOC) is a small business loan that offers revolving credit access. Similar to a credit card, you can access a LOC for a specified time limit. During this time, you’ll have the options to draw, repay, and redraw cash from your credit limit. Additionally, you’ll only pay interest on the amount of money you withdraw.

Apply for a secured business line of credit today.