Corporate Cards vs. Business Cards: How Do the Two Compare?

January 9, 2022

Most small business owners use credit cards to manage expenses and improve cash flow. In the beginning, you may start with a business credit card, but as your business grows, a corporate card may be a better option. 

That’s because business credit cards often come with a personal guarantee, which means that if you fail to make a payment, your personal assets are at risk. Additionally, as your business expenses grow, your personal credit score may be affected by as many as 50 points due to extensive credit usage.

On the other hand, corporate cards are tied directly to your business. They also make it easier for you to manage a higher volume of transactions and monitor employee spending.

Understanding the difference between these two cards will help you determine which is the right fit for your business.  


What are Business Credit Cards?

A business credit card is a credit card designed to be used by the business and is not meant for personal use. It’s available to companies of all sizes and is a good option for new business owners or solopreneurs. 

To apply for a business credit card, you’ll use your business EIN or your personal Social Security Number. Approval will be based on your personal credit score and financial history, not on the business’s financial performance.  

With a business credit card, you can carry a balance from month to month, but the cards typically come with double-digit APRs. 

Pros

  • Available to businesses of all sizes, including solopreneurs and new companies. 
  • It makes it easier for businesses to manage cash flow and expenses.
  • You may be able to earn cashback rewards or travel perks. 

Cons

  • A personal guarantee is required, so your personal assets and credit score are at risk.
  • Business credit cards are exempt from many of the consumer protections outlined in the CARD Act. 


What are Corporate Cards?

A corporate card is a credit or charge card issued to established companies. To qualify, your business must have a valid EIN. Approval is based on your company's financial history, not your personal credit.

Corporate cards can simplify your cash flow management and employee spending controls. You can issue corporate cards to your employees and let them charge authorized expenses for the business. Offering employee cards makes it easier for your company to manage expenses without having to approve every purchase.  

Pros

  • The company can set spending and category limits on each employee card. 
  • Spending limits ensure that employees only use the card for qualified business purchases. 
  • It’s easier for the company to track expenses.  
  • Employees don’t have to wait for the company to reimburse them for expenses.  
  • You may earn points and other rewards for taking out the card, like access to airport lounges and emergency travel assistance. 

Cons

  • Only available to incorporated companies with valid EIN. 
  • Employees can’t earn their own rewards for business expenses; all rewards go directly to the business or the owners.

Corporate vs. Business Credit Card

Corporate and business credit cards are designed for different types of businesses. Business credit cards are best for new business owners or solopreneurs because they can rely on your personal credit score. 

However, that means a personal guarantee is required, and your credit score will be directly affected as your business grows. Also, if you miss payments on a business credit card, the credit card company can come after your home, car, and other personal assets. 

In comparison, corporate cards are designed for incorporated businesses with valid EINs. Since approval is based on the company’s performance, you won’t have to give a personal guarantee. 

And with corporate cards, you can set spending and category restrictions on employee cards. Business credit cards may come with some of these features, but they won’t be as robust as what you’ll get with a corporate card.


Should I Use a Business or Corporate Card?

Whether you need a business credit card or corporate card really depends on how well established your business is. If you’re a new business owner or don't have an EIN, getting started with a business credit card may make sense. 

You’ll have to give a personal guarantee, but a business credit card will allow you to make business-related purchases and manage cash flow. But here are some signs that it may be time to switch to a corporate credit card:

  • You want the credit card approval to be based on the business’s financial performance, not your personal credit score. 
  • Your company nearly maxes out the spending limit on its business credit card each month.
  • You need a more robust and flexible way to manage employee spending.


The Bottom Line

Business and corporate cards provide a way for businesses of all sizes to manage spending and cash flow. Most small businesses start with a business card, but eventually, you'll probably want to switch to a corporate card.

Many companies offer corporate cards, but Toolbox provides a card that’s designed with contractors in mind. The application process is straightforward, and a personal guarantee is not required. Apply now and get approved in as little as one day.

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