Company credit cards are a popular option businesses use to manage expenses. With these cards, your business can allow your employees to pay for work-related expenses, such as meals, office supplies, hotel stays, and transportation. However, credit cards also come with some disadvantages that you should consider before you decide to issue them to your employees.
While corporate credit cards are easy to use, they can also lead to extra administrative tasks and uncertainty and can be susceptible to loss, theft, and fraud. At Hydrogen, we have developed this guide to corporate credit cards that will inform you of what this monetary option is and why another card option may be a better choice for your company.
What Are Corporate Credit Cards?
Though corporate credit cards are used for business expenses, they are essentially the same as personal credit cards. The key difference is that corporate credit cards link to your organization’s account. A cardholder can use their card in-store or online, typically with a PIN. Practically speaking, the difference is that cardholders of company credit cards usually need to provide proof of their purchase to the company’s finance team for tax purposes.
For companies with employees who have many business-related expenses, corporate purchasing cards are a convenient option. Rather than dedicating hours and resources to filing countless expense reports and reimbursing purchases, employees can use a dedicated corporate credit card to pay for these purchases.
How Do Corporate Cards Work?
Corporate credit cards can seem like a good solution for managing business expenses. Employees will know how to use these cards since they share similar functions with personal credit cards. These cards also offer flexibility in cash flow, as they are not debited until weeks after the purchase.
If you issue company credit cards, monthly expense statements are typically sent to the budget manager, CFO, and cardholder. This allows your business to track who is spending how much and what they are spending the money on after the purchase has been made.
Additionally, you can limit card payments to certain suppliers, which can further control costs and prevent employees from spending at suppliers or on items that aren’t business-related. Banks may also offer a range of services like coverage for rental vehicles, medical assistance, legal support, travel insurance, and rapid refunds if fraudulent transactions occur.
While these features can make a physical company credit card seem like a good option, they may not be the best choice for your business.
Cons of Corporate Cards
If your company is considering corporate credit cards, there are some disadvantages you may want to keep in mind:
- Lack of monitoring ability: Your finance team needs to know where your organization’s money is going. Besides a monthly statement, your team won’t have an easy way to monitor employees’ credit card use.
- Employee dissatisfaction: If you reserve your corporate credit cards for a select few employees rather than issuing them to every worker, this could cause some tension. Those who don’t receive a corporate card may feel untrustworthy or less valuable. Employees who don’t receive a card will need to pay for items with their own money, file an expense report, and get reimbursed. Or, they will need to find an available card when they’re ready to make a purchase, which can be a huge hassle for every party involved.
- Lack of control over employee spending: You may also want your corporate cards to offer the ability to control spending limits. You’ll want to create quick reports and analyze the kinds of costs that come with your cards. With company credit cards, this can be difficult or even impossible.
- Outdated technology: The web interfaces used to manage company credit cards can be hard to use and limited in the ability to integrate with accounting software. There may be certain processes that you cannot accomplish directly online, such as changing card limits, which means you’ll need to contact the bank each time you want to raise or lower a spending limit.
- Risk of fraud: Credit cards are susceptible to fraud, and the most common form is card-not-present fraud. In this case, the card’s details are stolen and used by the thief. You can ask employees to keep cards safe, but this isn’t always enough to prevent fraud, as fraudsters don’t always need a physical card to access your funds. If you allow employees to make online purchases, the risk of fraud can be even greater.
- Additional paperwork and hassles: With a company credit card, tracking receipts can quickly become a hassle. For both your employees and finance team members, it can be tedious and challenging to turn in receipts or collect receipts and supporting documents. Your finance team will be stuck determining how much each employee spent every month, confirming the legitimacy of these purchases, and following up on missing information.
Prepaid and Virtual Cards Are the New Company Card
If company credit cards don’t seem like the right option for your business, you may want to consider virtual corporate cards or prepaid company cards.
Company Credit Card vs. Prepaid Card
With prepaid cards, your employees won’t have to visit the bank to access money. They can use the card when needed, and you’ll save money and time, as you won’t need to write and mail paper checks or reimburse purchases.
Overspending isn’t possible with a prepaid card, which keeps your company spending under control. You can place limits on how much your employees can spend, and you won’t have to worry about whether you qualify for a credit card.
Company Card vs. Virtual Card
Virtual company cards are temporary numbers tied to users’ mobile wallets and created through mobile apps or the web. Virtual cards are becoming increasingly popular for single purchases, but they can also be used frequently by employees.
A virtual card minimizes how much personally identifiable information is made available after a user makes a purchase. With virtual cards, account numbers are encrypted and your employees won’t have to worry about losing a physical card.
Sign Up for Prepaid or Virtual Cards With Hydrogen
We believe prepaid or virtual cards are a better option than the typical company credit card. We know how complex and time-consuming it can be to build a financial platform, which is why we help companies develop their own debit or virtual card issuance. We have built integrations and established strategic partnerships with card-issuing banks and program managers, allowing us to negotiate the best pricing for our customers.
Our no-code library of apps and widgets can help your organization issue virtual or prepaid cards in just minutes. Request Hydrogen access today to issue prepaid corporate cards or virtual cards for your business.