What Is a Corporate Card? How Company Cards Work
A corporate card is a payment card a business gives its employees for work spending, billed through a company card program instead of the employee's own account. Depending on the program, the company, the employee or both are legally responsible for the bill, and the company sets limits on what each card can buy.
When the office manager at a 12-person electrical contractor books two nights of hotel rooms for an out-of-town crew on a company-paid corporate card, the $640 lands on the company's bill and she never fronts a dollar of her own money.
What counts as a corporate card
Corporate card is an umbrella term. Under it sit cards built for different jobs:
- general corporate cards, sometimes called T&E (travel and entertainment) cards, for everyday work spending
- purchasing cards, or p-cards, for buying supplies and services from vendors
- travel cards for flights, hotels and meals on trips
- fleet cards for fuel and vehicle upkeep
- accounts with no plastic, such as a number kept on file with a travel agency, or a virtual card number made for one vendor
In each case the business sets up the program and sets the rules. A small-business credit card an owner opens at the bank is a different setup, and how it affects the owner's own credit is covered in our post on whether business credit cards affect personal credit.
Who is liable: corporate, individual or joint
Liability means who legally owes the card issuer, the bank or card company that extends the credit and sends the bill. Card programs make the company, the employee or both liable, and each issuer sets the terms in its own cardholder agreement.
Corporate liability
The company alone owes the issuer. Washington State's commercial card policy, for example, defines corporate liability as the agency being solely liable to the issuing bank for all billed transactions. Employees can still be made to repay the company for unauthorized spending, or disciplined. They just don't owe the bank.
Individual liability
The employee owes the issuer. The same policy defines it as the cardholder being solely liable to the issuing bank, and the employee pays the bill and then claims reimbursement for approved expenses. The federal government's individually billed travel card works this way. GSA SmartPay's travel card training says the full balance is due by the due date whether or not the traveler has been reimbursed.
Joint liability
Both owe it. One large bank's corporate card guide describes joint liability as the company and the employee both being responsible for the debt, so an unpaid bill can come back to either one.
For most small companies, corporate liability is the simplest: the company's card, the company's bill.
Who pays when a card is stolen
Regulation Z, the federal rule that implements the Truth in Lending Act, limits what a cardholder pays for unauthorized use: charges by someone who had no authority to use the card, such as a thief. The cap is $50, or the amount charged before the issuer was told if that's less. It applies only if the card was accepted and the issuer gave the required notice and a way to identify the user. If you hand your card to a coworker who then overspends, that isn't unauthorized use.
Business cards get one carve-out. When an issuer gives 10 or more cards to one organization's employees, the Regulation Z rule on unauthorized use lets the issuer and the company agree on their own terms for that liability. Neither can charge an employee more than the cap for someone else's use, but the cap doesn't cover charges the employee made themselves.
Charge card or revolving credit
A charge card is generally paid in full every billing cycle, with no minimum payment and no balance carried over. Regulation Z's definitions call it a credit card on an account for which no periodic rate is used to compute a finance charge. A periodic rate is the interest rate applied to a balance, so in plain terms the account has no interest rate. A revolving card lets you pay part of the bill and carry the rest, with interest on what's left.
The difference bites hardest under individual liability. GSA's federal travel card is a charge card, and if the full undisputed balance isn't paid by the 60th calendar day after the billing date, the card can be suspended on day 61. When an employee's reimbursement runs late, the employee is the one past due.
What happens to the employee's credit
It depends on the liability type and the issuer. Here is what that same bank, J.P. Morgan, says in its corporate card guide, alongside two public programs:
- On corporate liability cards, the bank says the program won't require credit checks on employees.
- On individual liability cards, the bank says it runs a soft pull, a credit check that won't affect the employee's score. Washington State's policy says the issuing bank sets an individually assigned card's limit based on the employee's personal credit. GSA requires agencies to assess the creditworthiness of new travel cardholders, and someone with a low score, or who refuses the check, may get a restricted card with lower limits.
- On joint liability cards, the bank says personal credit isn't affected if the card is paid in full within a set number of days, but late or missed payments are reported to the credit bureaus.
- If an individual account is canceled for nonpayment, GSA warns that the cancellation may be reported to credit bureaus and the cardholder's personal credit rating may suffer.
Other issuers write their own terms, so read the cardholder agreement for who is liable, whether there's a credit check and what gets reported. If an employee is asked to personally guarantee a card the company says it will pay, find out why before they sign.
Controls that keep a corporate card in policy
Liability decides who owes the bank. Controls decide what can be bought in the first place. Card programs typically let an administrator set a per-transaction limit and a monthly limit on each card, and block merchant category codes, the four-digit codes that identify a merchant's type of business. A crew lead's card might work at supply houses and gas stations but not at liquor stores or for cash advances.
Worked example: one statement, two liability setups
The electrical contractor gives its lead tech a corporate card. Her October statement has four charges: $1,214.60 at a supply house for Job 2417, $386.20 for Job 2420, $207.00 of fuel, and a $38.50 pharmacy purchase she put on the wrong card by mistake. That's $1,846.30 in all.
Under corporate liability, the company owes the issuer all $1,846.30. In its journal entry, the debits record expenses and money the employee owes back, and the credit records what the company owes the issuer.
| Account | Debit | Credit |
|---|---|---|
| Materials, Job 2417 | $1,214.60 | |
| Materials, Job 2420 | $386.20 | |
| Fuel | $207.00 | |
| Employee receivable (personal charge) | $38.50 | |
| Corporate card payable | $1,846.30 |
The four debits add up to $1,846.30, matching the credit. Corporate card payable is a liability on the balance sheet, the report of what the business owns and owes. It clears when the company pays the issuer: a $1,846.30 debit to the card payable and a $1,846.30 credit to cash. The $38.50 stays in employee receivable until the tech pays it back.
Under individual liability, the statement goes to the tech. She pays the issuer $1,846.30 herself and files an expense report for the three business charges: $1,214.60 + $386.20 + $207.00 = $1,807.80. When the company approves her report, it debits the job and fuel accounts and credits a reimbursement payable owed to her, then clears that payable when it pays her. The pharmacy charge never touches the company's books, and no card balance sits on its balance sheet.
Managing corporate card spend day to day
Card controls stop the wrong purchase at the register. They can't tell whether a $480 supply house charge belongs to the right job, and they don't collect receipts.
Clyr does not issue cards of any kind. It connects to the cards you already have, including Amex, Visa and Mastercard, so your issuer, rewards and credit lines stay as they are. When a card is used, the cardholder gets a text and replies with a photo of the receipt. Coding rules fill in the GL account (the general ledger category, such as Materials), the job and the cost code.
A personal charge like the $38.50 above can be flagged from the same text, and it stays visible with the cardholder attached until it's settled.
FAQs
Usually, in the legal sense. GSA calls its travel card "a charge card, and not a credit card," which matches everyday usage, but Regulation Z defines a charge card as a type of credit card. Most of Regulation Z doesn't apply to business credit. The exception is its rules on issuing cards and on unauthorized use, which cover all credit cards, business ones included.
Sometimes, but expect more paperwork than for a business credit card. One large bank's guide says corporate programs generally have more qualification considerations, and applicants may be asked for financial statements, tax returns, and credit reports and ratings. A young company may not qualify yet. Until it does, a business credit card in the company's name or employee reimbursement can cover the gap.
Close it on their last day, not when the next statement arrives. Before they go, get receipts for every open charge, because nobody else will know what that $212 hardware store charge was for, and move any subscriptions on the card. Under individual liability, the employee still owes the issuer any unpaid balance and the company still owes them for approved expenses, so settle both.
At minimum: who gets a card and why, which liability type the program uses, spending limits and blocked categories, what receipts are needed and by when, and how personal charges get repaid. Add who approves statements and what to do when a card is lost. Have each cardholder sign it before the card arrives, so nobody can say they never saw the rules.
