This piece is a good high-level summary of some of the differences between a corporate card (also known as a travel card) and a business card, which are often conjoined when one reads about commercial cards in various articles. In the article, which appears in U.S. News & World Report, the author distinguishes the two general product groupings along the lines of business size targeted as well as the types of credit implications that exist for both companies and individuals. We at Mercator write about both types of card products in separate services, since they are meant for different businesses and have distinguishing business models and characteristics.
‘Business credit cards typically require a personal guarantee, which means both the business and the cardholder are liable for unpaid debt. Some card issuers routinely report business credit card activity on your personal credit report; others do not, or only when your account becomes delinquent……Another major difference between a corporate card and a business card is who’s eligible to get one. Typically, a corporate credit card is meant for a company that generates at least $4 million in revenue per year. Additionally, a large nonprofit organization or government agency might qualify for a corporate card. Business credit cards generally have looser revenue requirements or rely on the personal credit standing of the cardholder.’
It is also important to note that commercial cards as we write about them, most recently in a report titled U.S. Commercial Credit Cards Market Forecast, 2016-2022: Growing at a Healthy Pace, include a broader range of product types than just travel cards, such as P Cards, One Cards and Virtual Cards. Only Travel Cards would have individual or joint and several liability, since the other types of commercial card products are different use cases, centrally billed and the direct responsibility of the company. The author’s liability definitions follow:
- ‘Corporate liability: The company is solely responsible for the debt. In this case, the card issuer sends the bill directly to the company.
- Individual liability: An employee holding a corporate card is responsible for the debt. In this instance, the card issuer sends the bill to the employee’s home, and the employee is expected to pay the bill. Generally, the employee then will ask the company for reimbursement.
- Joint liability: The company and the employee together are responsible for the debt. In this scenario, an employee might be held liable for debt on the card he or she uses. An American Express corporate card, for example, is a joint liability card. An employee’s personal credit won’t take a hit if the bill is paid in full within 180 days. But once that period ends, American Express will report the delinquency to the credit bureaus, and that can damage the employee’s credit.’
Any issuance of a credit vehicle to employees with company liability on the line requires some administrative management, be it corporate or business cards. There are a number of best practices to encourage corporate card use as well as to control potential employee abuse, along with fairly sophisticated program management tools that issuers make available to their corporate customers. These are not typically available with a business card product to the same level of automation, nor in many cases required. From a high level, the author points out what both companies and end users should know about these company tools, so a good overview.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
