Corporate credit cards with rewards can provide important financial advantages for companies that have outgrown small business credit cards. But in order to capture the full economic benefit, it’s important to choose the corporate rewards card that makes the most sense for your company. The following discussion highlights what a business needs to know about corporate credit card rewards programs – from how they work to their benefits – so you can choose wisely.
How Corporate Credit Cards Work
Corporate credit cards, sometimes referred to as commercial credit cards, are those where the company itself is the client, not the owner of the business. For this reason, corporate credit cards are only available to C-Corporations, S-Corporations, and some LLCs. Further, credit card issuers usually impose revenue minimums, expected spending thresholds, and a minimum number of employee credit cards. During the application process, the corporation must show its credit worthiness by submitting credit reports, financial statements, and other documents.
Often, the impetus for moving to a corporate credit card program is to shift liability off the business owner and onto the corporation, the individual cardholders, or a combination of the two. Corporate credit cards are usually issued in both the company’s name and the individual cardholder’s name, even though the credit line belongs to the company. As such, the company sets guidelines for how employees can use corporate credit cards, including penalties for noncompliance.
Corporate credit cards are used for many types of expenditures, such as business travel and entertainment, general business procurement, hardware, software, and utility bills. One reason why is the ease and convenience they offer in comparison to checks and wire transfers when making business-to-business, e-commerce, and international payments. Beyond this purchasing power, corporate credit card programs provide clients with services like expense tracking, accounts payable system integration, and rewards.
With the benefits of corporate credit cards programs comes higher annual fees than small business and personal cards. This makes it all the more important to choose the right card for your business.
Choosing Corporate Credit Cards with Rewards
Like personal credit cards, corporate credit card rewards are earned based on spending activity and commonly referred to as “points,” which can be converted into rewards. Points from spending by all a company’s corporate cardholders are typically funneled into the corporation’s account, sometimes accumulating significant point balances. Before choosing a corporate rewards card program, it’s a good idea to investigate how points are earned and redeemed, who can redeem points, redemption rates, and expiration terms. Depending on the card issuer, popular corporate credit card rewards can include:
- Cash back: Points can be redeemed for cash that’s given back to the corporation, usually in the form of a statement credit, check, or bank deposit.
- Travel: Points can be redeemed to help pay for air and rail tickets, as well as ride-sharing services and rental cars. Hotel stays and cruises are other common travel redemption methods.
- Gift cards: Points can be redeemed for gift cards from major retailers, often used for business purchasing or given to employees as incentives.
- Shop with points: Online retailers may allow purchases to be paid with points instead of cash or credit.
- Charitable contributions: Some card issuers let corporations link their card account to a partner site that enables employees to redeem points towards charitable causes, such as fundraisers and nonprofits.
- Transfers to credit lines: Some issuers let you turn points into payments you can use to pay down outstanding borrowings, like revolving credit lines, mortgages, and student loans.
- Entertainment: Redeem points to help purchase tickets to sporting events, plays, and concerts. Sometimes this can enable early ticket access or VIP seating.
Points values tend to differ depending on redemption method and card issuer. For example, one card might offer a higher redemption rate when points are used for travel than for entertainment. When shopping with points, some retailers might have higher conversion rates than others. Additionally, many corporate credit card issuers will boost point conversions when used at hotel chains, airlines, and other hospitality companies where they have partnerships. To maximize reward value, it’s a good idea to identify which redemption rates best match the type of spending and vendors that align with your company’s normal spending activity.
It’s also important to be aware of reward terms and conditions, which are detailed in the corporate card member agreement and will include any potential information on rewards caps, points expiration dates, and what happens to unused rewards if your card agreement is terminated. Note that credit card companies can change their terms or fully discontinue reward programs with 90 days’ notice.
How Corporate Rewards Cards Benefit Employers and Employees
Often, both the employer and the employee enjoy benefits from a corporate credit card program with rewards and perks. From an employer perspective, rewards can be used to offset costs – redeeming points can reduce the cash cost of business expenses. Additionally, certain perks like car rental insurance, lost baggage coverage, and emergency medical transportation can lower potential costs and reduce risk. Some employers use their corporate credit card rewards to incentivize their employees and benefit from the goodwill that creates.
Some employers let employees link their corporate card rewards to their personal credit card reward programs or individual hotel or airline accounts. Large-scale procurement spending and frequent business travel can quickly build up significant points for personal use. However, a key aspect of the client-card issuer agreement is who can accrue rewards – the business or employees. Even in cases where the corporation accrues all rewards, employees can benefit from other perks, like hotel and airline VIP status, TSA PreCheck programs, and priority boarding.