Recently, there has been a significant surge in demand for corporate credit cards due to the changing requirements of Indian businesses. With over 50,000 start-ups disrupting conventional business practices, India has become a prime ecosystem for entrepreneurs.
Corporate credit cards are designed to address the challenges of digital spending for businesses. If you haven’t yet obtained a corporate credit card for your business, it’s a good idea to consider getting one. In the following section, we will discuss why you should consider acquiring a corporate credit card for your business.
What is a corporate credit card?
A corporate credit card is a unique type of credit card that a bank issues to a business, enabling the business owner to extend the card to their employees. By doing so, the reimbursement process for business-related expenditures becomes more seamless, without the need for personal funds.
With a corporate credit card, you know how to send money from a credit card to a bank account. By using a corporate credit card, you can increase the company’s purchasing power and improve its cash conversion cycle by providing short-term credit at zero interest. Many essential expenses, such as cloud services, marketing costs, and SaaS subscriptions, can only be paid with a credit card, making the corporate credit card an essential tool for businesses.
In addition, corporate credit cards offer higher credit limits than personal cards, allowing companies to pay for all business expenses without affecting personal liability. They simplify compliance and reporting processes for growing businesses by streamlining financial management. Also, corporate credit cards come with added perks, including rewards programs and lower charges for international transactions, making them a smart choice for businesses looking to streamline their finances.
Types of corporate credit Cards
The payment responsibility for a corporate credit card can vary depending on the type of card issued. In the case of an individual liability card, the employee knows how to send money from credit card to bank account and is responsible for paying the credit card issuer directly for any charges made. The employee must then file an expense report and seek reimbursement from the employer. The credit card issuer performs a “soft pull” credit check to approve the card issuance, which does not impact the employee’s credit score.
On the other hand, with a corporate liability card, the employer pays for all approved charges. However, the employee may still be accountable for paying the credit card issuer for any personal or unauthorised expenses. Since the company is responsible for paying the bill, the credit card issuer usually doesn’t check the employee’s credit history. In such cases, the employee may need to file regular expense reports to allow the company to reconcile the card statements each month.
When using a corporate credit card, an employee needs to determine beforehand who is responsible for paying the bill each month. If the employee is responsible for payment, they must set up a system to ensure timely payments and have sufficient funds to cover the balance.
Benefits of a corporate credit card
- Corporate credit card offers several benefits for both employers and employees. Employers can use corporate cards to limit expenses by placing restrictions on spending categories, transaction limits, and merchant types, making managing costs easier.
- Employees can enjoy financial relief as they don’t have to pay upfront for business-related expenses and can avoid the hassle of waiting for reimbursements.
- Corporate credit cards may also offer electronic expense reporting, which automatically populates expense reports with purchase information, making it easier for employees to submit timely and accurate reports.
- Corporate credit cards can offer rewards programs and benefits that frequent travellers can use, such as access to airport lounges, travel, and emergency assistance services, emergency card replacement, and car rental collision damage waivers.
- Rewards programs can also help boost employee morale, although it ultimately depends on the employer’s policy.
It is essential to read the credit card agreement to understand how these benefits work and activate them when needed, such as declining a rental company’s collision damage waiver and completing the transaction with the covered credit card.
If an employee is responsible for paying the credit card bill and falls behind on payments, their credit score could be negatively affected. This is why employees need to set up a system to ensure payments are made on time and have the funds available to cover the balance.
It’s always essential for employees to be well-informed about their company’s policies and procedures when it comes to using corporate credit cards. By familiarising themselves with the rules and sticking to them, they can help ensure that the card is used responsibly and in a way that benefits both the employee and the company. And if they have any questions or concerns, they should always feel comfortable contacting their employer or the card issuer for guidance.