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Company credit cards help keep track of work expenses, simplify accounting, keep track of spending across different departments and ultimately streamline the accounting processes. With benefits for both individuals and businesses, this type of credit card allows employees to separate their work and personal spending.
Company credit cards are like personal credit cards, except they’re designed with specific perks and tools to benefit businesses. With company credit cards you can easily analyze and manage your employee spending and earn rewards on business-specific purchases like office supplies and business travel.
An employee credit card works the same way as a personal credit card. The main differences are who pays the bill and whether card activity is reported to the personal credit bureaus.
In most cases, the company is liable for the employee credit card debt and employee card activity doesn’t affect the employee’s personal credit score.
Most employee credit cards are business or corporate credit cards assigned to specific employees. We’ve outlined the key differences between these cards below:
Business credit cards are linked to a main account and can be assigned individual spending limits from a centralized system. Providing employees with business credit cards reduces the need for expense reports and reimbursement processes, as only business funds are being used.
Business credit cards can also be linked to rewards programs, giving employers and employees the opportunity to earn cash back, points or frequent flyer miles for their spending. Additionally, business credit cards can provide a range of extra benefits, including liability insurance, spending reports and compatibility with popular accounting software programs such as Quickbooks or Microsoft Excel.
Corporate credit cards don’t require a personal guarantor. Instead, you’ll need to submit your company tax ID number and the bank will audit your company financials. Once you get the cards, you’ll start building your company credit. And you’ll only stain your company credit score without affecting your personal credit if you fail to make your payments on time.
This type of card offers higher spending controls and powerful analytics tools to help you monitor and optimize your company expenses. This is a great choice for companies with a large number of employees where tracking your business expenses can be difficult.
Employees may choose to use a personal credit card for their work expenses. The main benefit of this is that you can choose your own card. If you want to save money on spending, you may choose a low rate or a low fee option. If you want additional benefits, a rewards or frequent flyer card might suit your needs. Usually this is the best option for an employee card as you’ll get to earn rewards for business spending.
The downside of using a personal credit card for work spending is that you’ll be responsible for keeping your account in order by submitting statements or expense reports to your employer in order to claim reimbursement for spending on your card. Also, work-related purchases can put a strain on your utilization ratio, especially if a you have low credit limit.
If you need your employees to make business purchases often, it may be best to give them employee cards. That way you’ll simplify your bookkeeping and you can more easily get tax deductions.
But if you have fewer employees who rarely make purchases for your business, you can either wait until you really need a business credit card or consider getting a business debit card. Debit cards are a good alternative because you can’t spend more money than you have in your account, and debit cards don’t have cash withdrawal fees.
When you’re looking for company credit cards, you should consider what they offer. Primary consideration factors should include:
Always check the terms and conditions before you apply so you can learn if you’re subject to fees, eligible for rewards and promotional offers, or if there are any complimentary extras.
In case the company card you’re using doesn’t have active spending limits, be sure to:
You shouldn’t use your employee credit card for personal purchases. Aside from legal issues, it’s likely that you’ll be liable for those purchases and you may lose your job.
Company credit cards can be a great choice for your business if you have a number of employees and you want to simplify their spending process. With a company card, you’ll get better spending controls and limits, and you’ll be able to monitor and track employee card activity with ease.
If you’re not certain which credit card can serve your business best, check out our business credit card guide and compare your options.
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