Issuing corporate credit cards can help businesses take charge of their expenses and empower their teams. It’s a step that allows for custom spending management and deeper insight into a business’s financial habits.
Setting up these company credit cards involves determining eligibility, choosing a card program, and applying. When selecting a credit card program for your business, you’ll want to consider which features, perks, and credit terms best fit your financial goals, reflect your brand and principles, and appeal to your employees. If you’re considering setting up credit cards for your business, here’s what you need to know.
What’s in this article?
- What are company credit cards?
- Who’s eligible for a company credit card?
- Choosing the right company credit card
- Applying for a company credit card
- Managing your company credit card
- Overcoming challenges in getting a company credit card
What are company credit cards?
Company credit cards are specialized payment cards issued to employees to handle business expenses such as travel, dining, office supplies, and client entertainment. Unlike personal credit cards, these cards are tied to a company account. The responsibility for payment typically rests with the company, though this can vary based on individual agreements. Corporate cards are typically only issued to businesses with annual revenues of at least $4 million. Smaller businesses can apply for small-business credit cards.
Who’s eligible for a company credit card?
Any business that wants to launch a company credit card program must meet several requirements.
Business registration: The business must be legally registered and operational. The company must provide legal documentation demonstrating its operational status such as articles of incorporation, business licenses, or a certificate of good standing.
Creditworthiness: The business must have a good credit history and high credit score. This score is influenced by loan repayments, credit lines, and overall financial health.
Financial documents: The business must show documentation of financial stability. This might include balance sheets, income statements, cash flow statements, and tax returns.
Tax identification number (TIN): The business must have a TIN. In the United States, this is an EIN (employer identification number).
Personal guarantee: Small-business owners might need to offer a personal guarantee that they will take financial responsibility if the business doesn’t pay its debts.
Business bank account: Some corporate credit cards require the business to have a dedicated business bank account.
Company revenue: Corporate credit cards typically require a certain minimum annual revenue.
Usage policy: Corporate cards require the business to have a policy in place outlining the appropriate use: spending limits, permitted transactions, and more.
Choosing the right company credit card
Every business will have its own considerations to weigh when choosing and applying for a credit card. Selecting the right credit card requires carefully matching the card’s features and benefits with your business’s goals, needs, and financial behaviors. Choosing the right card requires looking at features of your business and features of available credit cards.
Consider the following factors when selecting a card.
Business size: Businesses making less than $4 million a year in revenue should look for cards specifically designed for small businesses. These often come with targeted rewards and benefits suited to their scale of operations.
Industry: Some cards cater to specific industries and offer rewards that meet the spending habits typical of those sectors.
Growth stage: Startups might need flexible credit limits and easy approval processes, while established businesses might want cards with premium rewards and higher credit limits.
Spending categories: Assess the types of expenses for which your business will most frequently be using these credit cards.
Frequency of use: Businesses with low credit usage might prioritize cards with low to zero annual fees, while more frequent users can benefit from rewards for hitting certain spending thresholds.
Financial health: Though smaller companies might need to provide personal guarantees or choose cards with modest benefits, companies in a strong financial position might have access to cards with better terms and more rewards.
Once you’ve assessed your business’s eligibility and key considerations, consider the following features of various credit card programs to select the best fit.
Card benefits: Seek out benefits that match where your business will spend the most money. For example, if travel is a frequent expense, look for cards with travel benefits or rewards programs.
APR: Compare the annual percentage rates (APRs) of different issuers. If you plan to carry a balance, seek cards with lower interest rates.
Annual fees: Analyze annual fees to confirm that benefits outweigh costs.
Credit limits: Make sure the credit limits meet your business’s spending needs.
Billing and payment options: Review billing cycles and payment options to determine what best meets your business’s cash management practices.
Integration capabilities: Cards that can integrate with the business’s accounting and financial platforms can simplify expense management and reporting.
Employee spending controls: If the card will be used by multiple employees, consider one that can set individual spending limits and restrictions.
Customer service: Consider the level of customer service provided, such as access to a dedicated account manager.
International use: For businesses with international travel, transactions, or both, look for a card with minimal foreign transaction fees, wide acceptance abroad, and global customer support.
Security features: Look into the card’s security features and fraud prevention systems, such as alerts for unusual activity.
Issuer reputation: Research the issuer’s reputation and stability. Partnering with a reputable issuer can bring peace of mind and long-term service quality.
Recommendations and reviews: Seek out recommendations from peers and read reviews to understand the experiences other businesses have had with the card.
Introductory offers: After considering the card’s long-term benefits, check out potentially valuable introductory offers such as 0% APR periods or bonus points.
Applying for a company credit card
Company credit card applications require preparation, attention to detail, and an understanding of your business’s financial standing. Here’s a step-by-step guide.
Select an authorized representative: Select a company representative to oversee the application process. This representative must have the authority to enter into binding financial agreements on behalf of the business. Common examples include a financial officer or an authorized manager.
Determine your needs: Define exactly why your business needs credit cards, which employees will be issued cards, and how employees will be permitted to use them. This will inform the features you seek out.
Research options: Compare card issuers and the value of various cards. Select the best match for your business needs.
Check credit history: Check that your business’s credit history is up to date, and address any errors before proceeding.
Gather documentation: Collect all necessary documentation, including but not limited to your TIN, financial statements, and business license. Different cards have different requirements, so confirm what you need before beginning the application process.
Submit application: Fill out the application form, which might require personal details of the business owner and/or financial officer applying for the card as well as business information. Submit to the issuer. The approval process can take a few hours to several weeks as the issuer reviews your submitted materials and credit history.
Review cardholder agreement: Once approved, you will be assigned a credit limit and sent a cardholder agreement. Carefully review the terms of this agreement, including how to handle disputes and unauthorized charges.
Set up an account management system: Set up a system for how you’ll track expenses, gather reports, and pay down your balance.
Distribute cards: Distribute cards to your chosen employees, and remind each cardholder of spending limits and usage policies. Common card recipients include sales personnel, executives, and employees with frequent travel or purchasing duties.
Managing your company credit card
Once credit cards have been issued, your business is tasked with monitoring and recording expenses, ensuring compliance with spending policies, and promptly paying off your account balance. Managing company accounts effectively creates a high level of oversight and control over your business’s credit card usage, preventing misuse and integrating card expenses with other financial records. Consider the following best practices for managing your company cards.
Establish spending policy and reconciliation process: Define what constitutes acceptable use of the card: which expense categories are allowed, and which are off-limits. Create a process with strict deadlines for cardholders to submit receipts and explain charges.
Set credit limits: Consider setting specific credit limits for each cardholder based on their responsibilities and spending needs.
Train employees: Train cardholders on how to use the card correctly, how to submit expenses, and what to do if the card is lost or stolen.
Integrate with accounting software: Integrate your card provider’s systems with your accounting software to automate expense tracking and reporting.
Monitor transactions: Frequently review transactions for each card to catch any errors or unauthorized spending early. Act promptly if discrepancies or violations of the spending policy occur. This might involve internal discussions or more formal disciplinary actions.
Pay balances: Avoid interest charges and penalties by always paying down your balance on time.
Review agreement changes: Keep up with changes to card terms or benefits. Adapt your spending strategies accordingly, and take advantage of any new offers.
Analyze spending patterns: Assess spending patterns to identify cost-saving opportunities, such as negotiating discounts with frequent vendors.
Adjust policies as needed: As your business evolves, periodically review and update your credit card policies to reflect any changes in your business’s spending needs or financial strategies.
Overcoming challenges in getting a company credit card
If your business is struggling to get approval for a company credit card, these strategies can help.
Improve creditworthiness: If your business credit score isn’t strong, focus on improving it by paying debts on time, reducing credit utilization, and ensuring credit records are error-free.
Build a financial track record: For newer and smaller businesses, consider starting with a small-business credit card or a small line of credit to build a positive financial track record.
Gather comprehensive documentation: Incomplete documentation can stall the application process. Confirm all necessary documentation is assembled before beginning the application process.
After your business has been approved for a credit card, challenges can arise regarding appropriate usage and account management. Here’s how to address common concerns.
Terms and conditions: Read the card’s terms with care, and ask the issuer for more details if anything is unclear. Misunderstandings can lead to unintentional misuse and surprise charges.
Employee training: Create a comprehensive employee training program that outlines how to use the card, the consequences of noncompliance and misuse, and best practices for card security and fraud prevention.
Financial discipline: Implement strict internal controls to avoid inadvertent spending and debt.
Credit limits: Review credit limits to ensure they reflect your business’s spending needs and repayment capabilities. Work with your issuer to adjust these limits as needed.
Review process: Set up a regular card statement review process to flag and address any causes of concern.