A corporate credit card can be a powerful payment tool for your business. Considering the combined benefits of enhanced employee spending control, expense analytics, streamlined processes, and the ability to reinvest rewards, it’s easy to understand why any business might want to apply for a corporate credit card.
All the major credit card issuers have their own set of requirements, but several eligibility rules are universal. Qualifications for a corporate card program are more stringent than those for personal and business credit cards because of the incremental investments a card issuer makes in each agreement, such as rewards, business tools, and customer service. Eligibility requirements include restrictions on business type, thresholds for company size, and expected activity.
In addition, corporate credit cards are issued to a company, not to people, which affects overall credit risk. If a company can’t check the following eligibility boxes, a business credit card – which is available to any type of business – might make more sense.
Business Type: Unsurprisingly, corporate credit cards are for corporations. If your company is a registered C-Corp, S-Corp, or LLC, it likely meets the business form requirement for most corporate cards. Business type is important because corporations are considered legal entities separate and distinct from their owners, unlike sole proprietorships and partnerships where liability is co-mingled with their owners. Some nonprofits and government agencies may also be eligible.
Company Size: Corporate card agreements come with a high level of customer service and many perks. In return for these benefits, card issuers have minimum thresholds for applicants in areas such as company size, expected annual spend, and number of active cards. Some card issuers measure size using annual revenue, while others look at cash on deposit. A review of major credit card issuer’s programs indicate that annual revenue eligibility begins at $4 million, while others start at $10 million or even $20 million. Non-traditional corporate cards, such as credit cards for startups, tend to look at cash balances rather than annual revenue. In those cases, applicants may need to have cash deposits of $100,000 or more.
Expected Activity: Another aspect of corporate card eligibility is the expected level of spending activity. One way issuers estimate activity level is by the number of employee credit cards to be distributed. Some card issuers set the minimum number of cards at 15. Other issuers have no fixed number, and some may count virtual or one-time use corporate credit card numbers. Another way credit card issuers estimate expected activity level is by requiring a minimum spending quota. A typical quota might be $250,000 for entry level corporate credit cards and escalate for premium level credit cards.
Information Requirements: Applying for a corporate credit card is usually done in person, with a representative from the credit card company. Because of the heightened level of scrutiny, online applications are less common. Several documents are usually required to help card issuers assess the company’s financial status and creditworthiness. Since the company is the applicant, each required document is for the corporation, not its owners or executives. The documents include:
Other Requirements: A few corporate credit card issuers may require other qualifications, including:
When applying for a corporate card, it’s important to consider variations in the liability terms of the card agreement. In all cases, it’s the corporation’s credit line. The corporation itself is responsible for paying the balances on its corporate credit cards, not its shareholders or executives. This liability differs from business credit cards where repayment responsibility rests with the business owner. However, sometimes, corporate credit card agreements can include a secondary responsibility from the individual employee cardholders. The differences between corporate liability, individual liability, and shared liability can be significant factors when choosing between different corporate credit card programs.
Corporate liability means that the company is completely responsible for any charges made on the corporate cards. The bill goes directly to the company for payment.
Some corporate cards are set up where the individual cardholders have the primary responsibility to pay the balance. In this scenario, credit card companies will check an employee cardholder’s personal credit scores and send bills directly to them for payment in accordance with the card’s billing terms. Employees often need to pay the bill out of pocket, which is why their personal credit situation can become an issue. Typically, the employee gets reimbursed from the company after submitting receipts and expense reports, in compliance with the company’s policies. Timing issues can cause issues for employees if there is a lag between payment and reimbursement. Missed or late payments to the credit card issuer can negatively affect the employee’s personal credit score.
Shared responsibility is a hybrid approach, where both the company and the employee have joint liability for outstanding balances. In this variation, if the employee has complied with company policies for credit card usage and expense reimbursement, they are not held personally liable for any missed payments. However, if those balances remain unpaid for an extended period of time, the credit card issuer can report the overdue balances to the various credit bureaus, reducing an employee’s personal credit rating. Additionally, employees are wholly responsible for any personal spending or unauthorized spending on the corporate credit card.
Once an application is approved, the next step in setting up a corporate credit card program is to establish company policies for using the card. These guidelines explain acceptable activity and the penalties for non-compliance. It’s a best practice to have every cardholder sign the guidelines. Important topics to include are:
