Credit cards are common these days, with the average American having between 2.6 and 3.7 credit cards in their wallet depending on the source of the statistics. Many businesses also make use of credit cards since they provide a way to cover expenses without needing cash-on-hand and provide a statement listing every transaction at the end of the billing cycle. For smaller businesses and startups, these cards are often issued in the business owner's name and then maintained by the company. There is an alternative to this, however: corporate credit cards.
What Are Corporate Cards?
The corporate card definition is slightly different than standard credit cards. They still function the same way as standard consumer cards, providing access to either a secured or unsecured line of credit that can be used and repaid for as long as the credit card account is active and in good standing. Instead of being issued to a specific individual within a company, however, the corporate credit card is issued to the company itself. Though this may seem like a small difference, it's a big deal; it means that the credit line is issued to a legal entity that is separate from the owner or anyone else within the company.
Corporate Card Benefits
There are many benefits to using corporate cards for your business instead of cards that were issued in your name. The biggest of these relates to liability for the debt; because the company itself owns the debt, it's much less likely that the business owner will face legal liability for the debt, or have it affect their personal credit rating under normal circumstances. Corporate credit cards can also have multiple authorized signers, allowing their use by several people within the company once their names are added to the signing sheet for the card. Many corporate card issuers also provide itemized statements that group expense types together, making accounting easier when the bills come due.
Corporate Card Drawbacks
Unfortunately, there are a few drawbacks to corporate cards. Corporate credit cards are generally harder to get than consumer cards. Banks and other card issuers typically aren't willing to issue a corporate card unless the business has at least a few years worth of financial transactions confirming it's a stable operation with a healthy cash flow. Security may be required for corporate cards due to the higher credit limits than consumer cards. Some may require high-value collateral. Interest rates may be higher in some instances, too, especially if the company in question is still relatively new.
Another Option: Fleet Cards
Another type of company credit card is the fleet card. These cards are fuel credit cards, typically issued by credit card companies that have agreements with multiple gas-station chains. The fleet cards are valid at a large number of different fueling stations across the country. Unlike other corporate cards where one card may have multiple signers, fleet cards typically have multiple cards created for use with different company-owned vehicles.
A driver authorized by the company often receives the fleet card along with the vehicle and must keep records of the car's mileage and amount of each fuel purchase. Drivers must buy their gas at gas stations that participate in the fleet program that issued the card since purchases typically aren't processed by standard credit-card processing companies. Instead, the stations have a separate reader for the fleet cards that are provided by the fleet card issuer. Though usage is slightly different than other company credit cards, billing is similar and statements show which cards/vehicles were buying gas when and where.
- three credit cards image by Aleksandr Ugorenkov from Fotolia.com