Key takeaways
Small-business cards are typically designed to meet the needs of small businesses, while corporate credit cards are better suited to the needs of corporates with millions of dollars in annual revenue.
You will typically be personally liable for payment on a small-business credit card, while there is usually no personal liability with a corporate card.
Employees can be made jointly liable for purchases they make with a corporate credit card, while that’s not usually the case with small-business credit cards.
Whether you’re a freelancer or you own a business with hundreds of employees, having a dedicated credit card for your business can make a lot of sense.
For instance, holding a business credit card makes it considerably easier to keep all your personal and business spending separate for tax purposes and bookkeeping. It can also provide valuable protections and cardholder benefits, like cash back or points.
But not all credit cards are created equal, and there are significant differences in debt liability, eligibility and perks between small-business credit cards and corporate credit cards. Read on to learn which option is best for your business.
What’s the difference between a business credit card and a corporate credit card?
Most of the differences between small business and corporate credit cards stem from one key distinction: liability. With small-business credit cards, the debt liability falls on the business owner, typically. The business owner is personally responsible for paying any debt acquired on the business credit card, and their credit will be impacted by the account activity, whether good or bad.
With corporate cards, the debt liability usually falls on the business itself. That means that the business owner is usually not personally responsible for the debt. This fundamental difference is why corporate credit cards tend to have stricter approval requirements than small-business credit cards. Let’s dig into some of these distinctions.
Small-business credit cards
Business credit cards are designed for small-business owners, but they generally work the same as traditional credit cards for consumers. Businesses of all types and sizes — from side gigs to multi-million-dollar empires — are eligible for business credit cards. To be approved for a small-business credit card, you’ll usually need:
At least a fair personal credit score (though higher is always better)
Your business’s tax ID — called an EIN — or your personal Social Security number
Small-business credit cards are generally easier to qualify for than corporate credit cards. Still, there are pros and cons to this option.
Pros
Business credit cards allow you to earn rewards on your spending and your employees’ spending
They can provide a helpful funding source for early business startup expenses
It’s easy to compare business credit card options online
Depending on the card you choose, you may be able to pool rewards on personal and business cards within the same program
It’s easier to get approved for them without an extensive business credit history, making them a better option for startups
Cons
Business owner may be personally liable for business debts acquired on the card
Employees can’t be made jointly liable for purchases made with employee cards
Business credit cards may not come with as many expense-tracking tools as corporate cards
Corporate credit cards
Corporate credit cards, on the other hand, are designed for larger, more established businesses. To be approved for a corporate credit card, you’ll usually need:
Several millions of dollars in annual revenue
And established business credit history
Corporation status — C-Corp, S-Corp or some LLCs
Even if that sounds like your business, know that corporate cards come with their share of advantages and disadvantages.
Pros
Corporate cards make it easier to manage and monitor expenses for hundreds of employees
You may be able to earn cash back with a corporate card
You can make your employees jointly liable for purchases they make on the corporate card
Cons
Corporate cards are not as easy to apply for online
They tend to come with fewer protections on purchases
You need an established business credit history and significant revenue to be approved
Key differences between business and corporate cards
Business credit cards | Corporate credit cards | |
|---|---|---|
Who’s liable? | The business owner usually signs a personal guarantee, making themself liable for all debt (including any debt charged by employee cardholders). | The business owner is typically not required to assume liability for the debt (liability instead rests with the business entity). Employee cardholders may be partially liable for debt. |
Who’s eligible? | All business types, including informal and unregistered businesses. There is usually no required business size, business credit score or revenue. | Established corporations with multi-million dollar annual revenue, good business credit and the ability to meet a high spending threshold. Specific requirements will vary by issuer. |
How to decide between a corporate and a business credit card
Here are some of the issues you should consider as you decide between corporate cards and small-business cards:
Do you want employees to be jointly liable for purchases made with their cards? If you want employees to be jointly liable for any purchases they make with their card (including personal expenses they charge), then a corporate card is your best bet. If you just want your employees to have a way to charge purchases, and you don’t mind taking on all the liability, however, a small-business card account may be just fine.
Do you want to earn traditional credit card rewards? Small-business credit cards tend to offer better rewards programs than corporate cards, and you may even be able to earn the same type of rewards you earn on your regular spending. If you have a personal credit card that earns Chase Ultimate Rewards points, for example, you could sign up for a Chase business credit card that offers the same rewards and pool all your points in a single account.
What kind of cardholder perks are you hoping for? Perks offered by both types of cards vary. If you’re hoping for a business card with a 0 percent intro APR offer or consumer protections like travel insurance, a small-business credit card is probably a better bet.
Making the switch: Moving from a small-business card to a corporate card
If your business has grown to the point where you have hundreds of employees to manage, you may want to consider a corporate credit card instead of the small-business cards you’ve used in the past. It can also make sense to switch if you want access to the detailed spending reports some corporate cards offer or if you want to have employees be jointly liable for purchases they charge to their accounts.
That said, corporate credit cards are generally best for businesses that bring in millions of dollars in revenue each year, as well as those with large numbers of employees who are making purchases on behalf of the business. Your business will also need an established credit history before you apply, which will be reviewed as part of your corporate credit card application.
The bottom line
Getting a credit card for your business is an important part of being a business owner, and that’s true whether you employ hundreds of people or just yourself. Just make sure you’re getting the right type of business credit card for your business and that you have access to the tools and resources you want the most.
Also, remember that the best business credit cards should let you earn cash back or travel rewards, which can add up quickly if your business spends a lot on miscellaneous purchases or inventory each month.
As an enthusiast and expert in the field of business finance and credit, I can confidently provide insights into the differences between small-business credit cards and corporate credit cards. My depth of knowledge is backed by extensive research and hands-on experience in the financial industry, particularly in the realm of business credit and corporate finance.
The key distinctions between small-business credit cards and corporate credit cards revolve around the concept of liability. Small-business credit cards typically make the business owner personally liable for any debts incurred on the card, impacting their credit score directly. On the other hand, corporate credit cards usually place the debt liability on the business itself, relieving the business owner of personal responsibility.
Let's delve into the concepts discussed in the article:
1. Liability:
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Small-business credit cards:
- The business owner signs a personal guarantee, assuming personal liability for all debts, including those charged by employee cardholders.
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Corporate credit cards:
- The business owner is usually not required to assume liability for the debt; the liability rests with the business entity. However, employee cardholders may be partially liable for debt.
2. Eligibility:
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Small-business credit cards:
- All business types, including informal and unregistered businesses, are eligible. No specific business size, business credit score, or revenue requirements are mandatory.
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Corporate credit cards:
- Designed for established corporations with multi-million dollar annual revenue, a good business credit history, and the ability to meet a high spending threshold. Specific requirements vary by issuer.
3. Decision Factors:
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Employees' Liability:
- Corporate cards allow for joint liability for purchases made by employees, while small-business cards usually do not.
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Credit Card Rewards:
- Small-business credit cards often offer better rewards programs compared to corporate cards. Consider your preferences for traditional credit card rewards.
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Cardholder Perks:
- Perks vary between the two types of cards. Small-business credit cards may offer better introductory APR offers or consumer protections, while corporate cards may focus on expense management.
4. Switching from Small-Business to Corporate:
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Consider switching to a corporate credit card if your business has grown substantially, with a larger number of employees and a need for more advanced spending reports.
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Corporate credit cards are best suited for businesses with significant annual revenue and an established credit history.
5. Bottom Line:
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Choosing the right business credit card is crucial, regardless of the size of your business. Ensure the card aligns with your business needs and provides access to the desired tools and resources.
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Business credit cards, whether small-business or corporate, should ideally offer cash back or travel rewards, especially if your business incurs substantial monthly expenses.
In conclusion, navigating the world of business credit cards involves understanding the nuances of liability, eligibility, and perks associated with each type. It's essential to make an informed decision based on your business size, financial standing, and specific requirements.
