Guide to corporate cards

Corporate cards are a financial tool businesses use to make it easy for employees (cardholders) to pay for business expenses and manage budgets. However, choosing the right corporate card program can be challenging.

This guide gives an overview of corporate cards and how to evaluate which corporate credit card is best for your business.

Let's dive in.

What is a corporate card?

A corporate card helps companies manage their business expenses and budgets. It's often used for expenses like travel, digital ads, client entertainment, cloud computing, SaaS software subscriptions, and more.

One of the first concepts you’ll encounter when evaluating different corporate cards is the personal guarantee.

What is a personal guarantee?

A personal guarantee means that if your business fails to pay its corporate card balance, the business owner can be held financially liable for the debt. Some corporate card providers require a personal guarantee to limit their risk exposure.

Others elect not to require a personal guarantee, instead balancing risk by relying on cash-based or more dynamic underwriting models.

Benefits of corporate cards

Businesses typically use corporate cards to centrally manage company spending and to control or prevent unnecessary or out-of-policy employee (cardholder) spending.

Additional benefits include:

• Alternative to employee reimbursements for business expenses
• Improves cash flow depending on the credit terms offered
• Card policies and spend controls can help mitigate fraud
• Support efficient accounting processes, including month-end close
• Cashback or other spend-based rewards

Drawbacks of corporate cards

Without careful management, employee cards can lead to overspending, uncontrolled expenses, and other financial risks for the business. Depending on the corporate card provider, other potential drawbacks can include:

• High interest rates and annual fees can lead to debt build-up and affect your business credit score
• Risk of card misuse or fraud
• Some vendors choose not to accept cards as a payment option
• Points-based rewards systems can be difficult to understand and redeem
• Application process can be extensive
• Foreign transaction fees can add up

Due to many of these challenges, some businesses choose to give corporate cards only to a select number of employees. However, this approach may result in approval delays, a potential downside.

Recently, new technology has made it possible to distribute corporate cards with programmable controls, automated approval flows, and category- and vendor-level restrictions, getting around these drawbacks.

Tip: Having a comprehensive expense policy in place – supported by a platform that automates policy enforcement – makes it easy to enjoy the benefits of corporate cards while mitigating drawbacks.

Now that we have broadly defined corporate cards, let's look at two major types of cards you will encounter when evaluating corporate card offerings: corporate credit cards and corporate charge cards.

Note: Rho Cards do not require a personal guarantee or a personal credit check, meaning business owners are not personally liable for their business accounts.

Types of corporate cards

Some businesses find traditional corporate credit cards work best, while others prefer corporate charge cards. Informed by our general market observations, here is a simple overview that explains each concept and their pros and cons.

Credit cards with lines of credit

A corporate credit card with a line of credit, also known as a business credit card, similar to personal credit cards, allows clients to pay off their credit card bill balance each month or carry the balance forward with applicable interest.

Pros of corporate credit cards with credit lines

• Carrying a balance over can help manage cash flow during fluctuating income or unexpected expenses
• If the creditor chooses to report credit activity to bureaus like the Small Business Financial Exchange, businesses can build credit history that can be beneficial when seeking financing or negotiating with suppliers
• Revolving credit could make it suitable for especially large business purchases or expenses that may require extended payment terms

Cons of corporate credit cards

• Higher interest rates from some providers could compound debt accumulation and impact credit rating, making it difficult to secure a business loan
• Could promote poor financial discipline and increased spending among employees
• Credit card issuers may charge annual or late payment fees, reducing potential cost savings and benefits
• May rely on annual revenue-based underwriting, which limits accessibility for many startups

Concern about fiscal discipline and expenses outlined above is why many businesses elect to use corporate charge cards instead.

Corporate charge cards

Corporate charge cards are a type of credit card with an important caveat: they do not provide a revolving line of credit but require the outstanding balance to be paid in full by a predetermined date.

Pros of corporate charge cards

• Repayment requirement promotes responsible financial discipline
• Eliminates the risk of debt accumulation and expensive late fees
• If the creditor chooses to report credit activity to bureaus like the Small Business Financial Exchange, businesses can build credit history that can be beneficial when seeking financing or negotiating with suppliers
• Simplifies expense tracking and accounting software data flows

Cons of corporate charge cards

• May pose challenges when your business faces cash flow constraints
• Businesses must manage cash flow efficiently and communicate with corporate card partners as needs and conditions change

When evaluating your options, ask yourself the following questions:

• ‍Expense policy in place: Do you have a written expense policy, and has the policy been communicated to your staff?‍
• Debt carrying capacity: Is the ability to take on long-term debt a vital tool for your business, and is it worth the potential risk?‍
• Financial discipline: Would your business benefit from repaying your balance at the end of each month? Will carrying a balance contribute to poor spending decisions?

Did you know? The Rho Card is a corporate charge card that offers holistic credit limits. With the Rho platform, you can build custom spend controls and approval flows that automate expense policy enforcement and limit out-of-policy spending.

How to choose a corporate card provider

One easy way to understand the variety of corporate card provider options is to group them into two categories: traditional corporate card providers and spend management fintechs.

Legacy corporate card providers

Examples include traditional bank account providers and credit card companies like American Express, Capital One, JP Morgan Chase, Wells Fargo, Bank of America, and others whose companies have been around for decades.

Pros of legacy corporate card providers

• Strong brand recognition
• Competitive point-based rewards

Cons of legacy corporate card providers

• Lack of technology integrations for streamlined expense management and accounting
• Restrictive underwriting models and terms can limit accessibility for many startups
• Customer support issues and clunky user experiences

Evaluating between legacy corporate card providers is relatively simple:

• Who can provide the best credit terms?
• Who provides the best rewards?
• How expensive are the fees?

However, if you are looking for a more modern solution that feeds into a more holistic approach to business finances – supporting essential functions like AP, expense management, banking, and treasury – fintechs offer robust corporate card options supported by world-class software.

Spend management fintechs

This list includes Rho, Brex, Ramp, the Divvy credit card, and other technology companies that offer corporate cards but as part of a holistic spend management platform.

Pros of spend management fintechs

• Corporate cards integrated with other capabilities including AP and expense management
• Payment data workflows support faster month-end close
• Strong user experience
• Mobile apps for on-the-go expense receipt submission

Cons of spend management fintechs

• Brands haven’t been around as long as American Express
• Customer support levels can vary

Evaluating between fintechs typically comes down to the following considerations:

• How well do they integrate with the rest of your finance stack?
• What is their pricing? Some are fee-free, while others charge per-seat or tiered pricing
• What additional platform capabilities does the provider offer?
• Do they have responsive customer support?

Setting up discovery calls with any of these brands is as easy as signing up for a demo on their website. To support this process, we recommend considering the following company-specific and provider-specific considerations:

Questions to ask yourself

• ‍What are your spending patterns and needs? Audit the company's typical expenses, including business travel, supplies, and recurring payments, to identify the most suitable corporate card features and benefits.‍
• What is your preferred payment flexibility? Determine if your company prefers the option to carry a rolling balance or wants to use a monthly repayment requirement to promote responsible financial discipline (charge card).‍
• What level of spending controls do we need? Assess the level of control required for employee spending, such as setting individual spending limits and restrictions.‍
• How often are large purchases made? Evaluate the frequency of large purchases, as credit  cards with rolling lines of credit might be more suitable for businesses with occasional significant expenses. Consider your long-term plans and the need to invest in assets (hardware, software, other equipment) in the future.‍
• What expense management processes do we currently have in place? Identify the existing expense management practices and assess how well a corporate card can integrate and enhance these processes.

Questions to ask a corporate card provider

• ‍Is there seamless integration with our accounting software and/or ERP system? Inquire about the provider's compatibility with the company's accounting software to facilitate easy, real-time reconciliation and financial reporting.‍
• How does the card integrate with the rest of my finances? Corporate cards are most effective as a spend management tool when complemented by expense software that integrates with the rest of your operational software.‍
• What level of customer support is provided? Check if the provider offers dedicated support and assistance for card-related issues or inquiries. Can you get a support person on the phone when you need them, or is support mainly through email and chat?‍
• What are the fees and costs involved? Inquire about annual fees, interest rates, transaction fees, and any other charges associated with the corporate card program. You also need clear answers on when fees and interest payments are charged to minimize the impact of these expenses.‍
• Does the provider offer custom categorization and mapping? Assess if the integration allows for custom categorization and mapping of expenses to match the company's specific chart of accounts in the ERP system. This is a huge time saver and sharply reduces the risk of account coding errors.‍
• Is there automated reconciliation functionality? Ask if the integration provides automated reconciliation features, such as matching transactions and flagging discrepancies. Another tool to save time and speed up the monthly closing process.‍
• Does it support multi-currency transactions? Check if the integration supports multi-currency transactions and the platform can handle currency conversions during reconciliation.\
• What level of security is in place for data transfer? Ensure the integration employs robust security measures to protect sensitive financial data during transfer.‍
• Is there a dedicated onboarding or training program for integration? Inquire if the provider offers training or onboarding resources to help the finance team efficiently use the integration for reconciliation.‍
• What additional value-added services are offered? Assess if the provider provides additional services or benefits, such as travel assistance, expense reporting tools, or vendor discounts.

In case helpful, we made a free Google Sheet template to help you evaluate the best corporate card.  

Did you know? InnoMark’s account executives were frustrated by SAP Concur and their previous corporate card provider. InnoMark’s controller implemented Rho in minutes, saving his finance team hours and $10,000+ in Concur fees with a new expense management system the InnoMark sales team loves.

Credit card points vs. cashback

Some corporate cards offer points-based rewards, while others provide cashback. Here is a breakdown of the pros and cons of each to help you evaluate rewards programs.

Pros and cons of points-based rewards programs

Credit card providers first introduced rewards in the 1980s, frequently linking them to frequent flier or hotel loyalty programs. This innovation established the foundation for the travel-centric, points-based reward programs that remain prominent today.

But even though points are the longest-running option, they aren’t necessarily best for your business.

Points can still be a great asset for business teams who travel frequently. You can redeem your points balance to book flights, accommodations, or rental vehicles—or to secure upgraded travel experiences like airport lounge access.

Depending on the card and loyalty program, you may also find opportunities to earn 2X to 5X points on certain purchases, helping you achieve a desired reward faster.

However, in the Zoom meetings and virtual conferences era, the allure of accumulating travel points has lost its luster. Many businesses have left point balances largely untouched for the past two years—and, in some cases, these points will expire before they even have a chance to use them.

Beyond travel, it's common for points to be redeemable at retailers, either for purchases or gift cards. The downside is that many teams find redeeming points overly complicated and time-consuming.

Certain reward programs also allow you to convert your points to cash to help boost your bottom line—although you can expect to receive around only $0.5 per point, a notable loss in value.

Pros and cons of cashback rewards programs

The alternative to points is choosing a cashback corporate card. Cashback programs are typically straightforward—as you use the card for business expenses, you get a percentage of each purchase added to a cash balance.

The advantages of cashback are obvious but significant:

• You can apply cash rewards toward any type of future purchase
• Unlike points, you won't have redemption restrictions such as brand requirements or blackout dates
• Cashback gives you greater flexibility and more options even if you decide to use your rewards on business travel
• Cash never expires

In addition to the reward structure, pay attention to terms and conditions that may be buried below a credit card’s promotional offers and perks. These can include:

• Annual fees that instantly cut into the cashback you earn. Some companies also charge a fee for each card you issue within your team, which can quickly add up.
• Bonus rewards that entice new members but often come with reward caps or time restrictions. In the long run, the bonus will pale compared to what you can earn throughout the year.
• Redemption terms that restrict when you can redeem your cashback—like every quarter or only after you reach a minimum threshold
• High barriers to entry, with credit cards offering the highest rates of cashback also requiring an excellent credit rate to qualify

Once you decide on a cashback card, the next step is to optimize your reward opportunities.

An easy way to do this is to use your card for more of your current business expenses—instead of checks, ACH transfers, or other payment methods. You're already spending the money, so why not get rewarded?

Did you know? The Rho platform is free to use, and the Rho Card offers cashback on qualifying purchases.

Additional resources to help you find the right corporate card

Choosing the right corporate card partner can be hard. If you're interested in further reading, check out these other helpful resources:

• Understanding credit limits: What are the different underwriting methods?
• Virtual cards 101: The benefits of going virtual with corporate cards
• Fraud prevention: How to create fraud protection policies?

Wrap-up: Apply for the Rho Card today!

Modern finance teams and operators trust Rho’s all-in-one financial platform to manage their spending and cash.

To speak to one of our payment experts about your business’s credit needs, schedule a conversation today.