Corporate Business Credit Card

Monday, June 11, 2012 at 9:39pm by Site Administrator

How Corporate Cards Differ from Business Cards

Searching for business credit cards can be a bit confusing. Many lists of the top credit options contain a number of great cards for small business, but these may not be distinguished from corporate credit cards. This can lead to unreal expectations on the part of owners, and it points to the first necessary distinction. What is the difference between a small business and corporate entity? Once this is understood, the differences between corporate and business cards will make more sense.

Defining a Corporate Versus Business Entity

A business requires little in the way of official establishment. Anyone can choose a service or design a product and apply for an employer identification number to attach to a business name. With an EIN, you can set up a business checking account and begin opening utility and other accounts in the business name. Once the business has an established credit history, and strong enough credit score, it is possible to successfully apply for a business credit card without endangering your personal finances.

Corporations have been legally classified as persons by various Supreme Court rulings. These are typically thought of as large businesses with many employees and a corporate charter. This charter allows the business to function as an entity separate from all owners and employees in terms of civil liability and, in some cases, criminal liability. Other entities that can be classified as corporate include government organizations and nonprofits.

Scale of operations and legal designation appear to be the greatest differences between business and corporate entities at first glance. A corporate charter transfers all financial liability away from owners, and a formal business establishment merely implies separation of business and personal finances to some degree. These differences account for the distinction between corporate and business credit cards.

Business Credit Cards Explained

Until the CARD Act of 2009, business and personal credit cards were regulated in the same manner. Instead of changing the terms of business cards, the CARD Act placed new restrictions on providers of personal credit cards. Hence the easiest way to understand business credit is to remember how personal credit worked in the past. The only real difference is that a business card has the name of the business above the card holder’s name.

Of course, business cards offer several advantages for the small business owner. The first, mentioned above, is separation of business from personal finances. Nominally this will make it easier to handle accounting and taxes. Substantially it can protect the owner from business failure leading to unpaid debts. Other benefits include rewards programs designed for different types of small business and higher spending limits than are generally available with personal credit cards.

The disadvantages of business cards are those generally associated with personal cards before the CARD Act. According to researchers with Pew Charitable Trusts, 80% of business cards contain an “any time” clause allowing the provider to change the terms at will. Penalty fees are almost entirely unrestricted, and penalty interest rates can be applied without notice and continue indefinitely. Providers are also allowed by law to maximize finance charges by applying payments to the lowest interest-rate charges first. Business credit cards can be a great way to handle monthly expenses, earn rewards on purchases, and build your score for better terms on future loans, but extreme caution is recommended.

Corporate Credit Cards Explained

Corporate credit options are not typically advertised in the traditional means, such as direct mail and internet advertisements. They often appear beside business credit cards on lists of the best credit options, however, and deserve an explanation for this reason. A corporate card can seem like a standard credit card at first glance. There will be an APR listed, details on a rewards program, sign-on bonuses, and an introductory period.

The similarities stop there. Larger clients present a more stable income source over the long-term, and their needs are more complex than those of a small business. Corporate credit cards often come with custom-designed software used to track, approve, review and reimburse a large number of employees. Corporate cards are actively marketed to a select audience of corporate clients at large banks and government entities. They are somewhat comparable to group health plans in that terms, including the rewards programs, are readily changed to match the needs of the client. One of the easiest ways to distinguish the business from corporate cards is with benefits. Corporate cards generally do not charge for issuing cards to multiple employees.

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