Corporate card: What is it for? What are the types? [Complete Guide]

In the business world, it's essential to understand all the mechanisms available to optimize your business and its operations. Among these is the corporate card, a tool designed to provide greater control over company purchases.

However, there are still many questions about corporate cards and how they work. Therefore, in this article, we'll provide key details about this type of card and the benefits it offers.

Read on to learn all about the corporate card.

What is a corporate card?

The corporate card is a financial instrument used by companies to facilitate and control expenses related to their commercial activities.

It works similarly to a credit card, but is intended exclusively for corporate purposes. Authorized employees can use the card to cover expenses related to travel, purchasing materials, paying suppliers, and more.

In other words, it's a credit card, but it's issued directly to the company and authorized for use on company-related matters. Furthermore, it's restricted to authorized employees.

What is the corporate card for?

A corporate card serves as a financial tool used by companies to facilitate and control expenses related to their commercial activities. It can be either a debit or a credit card and is designed to be used exclusively for corporate expenses.

It serves several purposes:

• Payment of Business Expenses: Employees authorized by the company can use the corporate card to pay for various business-related expenses, such as business travel, lodging, food, transportation, material purchases, and more.
• Expense Control: The corporate card allows the company to set spending limits for each user, providing more efficient control over expenses and avoiding excesses.
• Centralization of Financial Control: By consolidating expenses into a single financial instrument, the company can centralize financial control, facilitating expense management and reconciliation.
• Ease of Accountability: Using a corporate card simplifies the accountability process, as transactions are recorded. This facilitates auditing and transparency of the company's finances.
• Controlling Expenses on Business Travel: Especially useful for expenses during business trips, the corporate card helps control and monitor employee spending, providing greater efficiency and avoiding the need for subsequent reimbursements.
• Historical Record of Expenses: The corporate card generates a detailed record of the company's expenses, enabling historical analysis that can be valuable for budget planning and strategic decision-making.

Thus, the corporate card is a tool that aims to simplify and organize financial transactions related to the company, offering greater control, security and practicality in managing corporate expenses.

What are the advantages of a corporate card?

Corporate cards offer several advantages for companies. They allow you to set spending limits, facilitating control and preventing excess spending. Centralizing expenses in a single financial instrument simplifies administration and reconciliation, making the process more efficient.

Transactions made with the card are recorded, facilitating accountability and contributing to transparency in the company's finances. When traveling for work, the corporate card allows for more effective control, avoiding the need for subsequent reimbursements. Detailed historical records of expenses are valuable for financial analysis and budget projections.

Additionally, corporate cards can be configured with security measures, such as passwords, providing an additional layer of protection against unauthorized use. Transaction speed is a plus, eliminating the need for refunds and simplifying administrative processes.

Some corporate cards also offer benefits and rewards, such as discounts on specific services or points-accumulation programs. This gives the company even more advantages when using the card.

How does the corporate card work?

A corporate card is an essential financial tool for many companies, providing ease, control, and agility in corporate spending. Therefore, it's important to understand how it works so your company can benefit from it.

One of the first things to consider about corporate cards is the payment model. There are two main options: prepaid and postpaid.

With the prepaid model, the company must deposit a certain amount on the card before employees can use it. This type eliminates the need for credit limits and provides tighter control over spending. When the card's balance is depleted, a new top-up is required to allow new transactions.

In the postpaid model, the card works similarly to a conventional credit card. The company undergoes a prior credit assessment, and each card is assigned a credit limit. Expenses incurred throughout the month are recorded on an invoice, which must be paid by the company upon closing.

When using corporate cards, many companies establish control measures to authorize purchases. These authorizations can range from specific spending limits to the need for prior approval for certain transactions.

Strict control over authorizations not only prevents unauthorized spending but also contributes to more efficient and transparent management. Some corporate cards allow companies to set up alerts for specific transactions, ensuring continuous oversight.

The corporate card process is designed to be simple and efficient. Authorized employees can make purchases, whether online or in-store, just as they would with a personal credit card. The main difference lies in the strictly business purpose.

Each transaction record is automatically linked to the corporate card, providing accurate, real-time tracking of company spending.

After all this, comes the payment. In the case of postpaid corporate cards, the invoice is generated at the end of the billing cycle, usually monthly. This invoice includes all transactions made by employees during that period.

It is the company's financial responsibility to pay this invoice, ensuring that all expenses are in accordance with established policies and guidelines.

In the case of prepaid cards, the company is responsible for recharging the card according to your purchasing needs.

What are the rules for the corporate card?

The rules surrounding corporate card use are crucial to ensuring responsible financial management and preventing abuse. There are established rules and guidelines to ensure it works optimally.

To begin with, the corporate card must be used strictly for work-related expenses and company benefits. Personal purchases unrelated to business activities are strictly prohibited.

Many companies establish specific categories of allowable expenses, such as business travel, lodging, meals during working hours, office supplies, among others.

Certain categories may be restricted, such as entertainment, purchases of personal items, and expenses not authorized by company policy.

Another guideline concerns the limit. Each corporate cardholder can have spending limits set, helping to control expenses and prevent overspending. Specific limits can be set for different expense categories.

Some expenses may require prior authorization before making a purchase. This is especially true for significant expenses or expenses outside of the standard categories.

It's important to know that corporate card users are responsible for all expenses incurred using the card. Accountability is mandatory, including the presentation of receipts and justifications for each transaction.

For business travel expenses, such as lodging, transportation, and meals, limits and rules may be specifically defined. The policy typically requires employees to submit detailed travel expense reports.

Another important operating rule is that only authorized company employees can hold the corporate card. Each cardholder must understand and adhere to the company's established usage policies.

Violations of corporate card rules may result in penalties, which may range from warnings to more severe disciplinary measures, depending on the severity of the violation.

By establishing clear rules and effectively communicating them to employees, companies can maximize the benefits of the corporate card, ensuring its responsible use and alignment with organizational objectives.

What are the types of corporate cards?

Corporate cards can be categorized into different types, each with specific characteristics. Each fulfills its role within the company's expectations.

Now, learn about the types of corporate cards you can have:

Prepaid Corporate Card

With this type of card, the company needs to pre-load an amount onto the card before it can be used by employees.

There is no need for credit approval, and spending is limited to the amount available on the card.

This card offers the following benefits:

• Strict control of expenses, as expenses are limited to the amount charged.
• It does not require credit approval and is accessible to companies of different sizes.

On the other hand, you have the following disadvantages:

• Spending limitation according to the pre-loaded amount.
• Need for frequent recharges.

Postpaid Corporate Card

It works similarly to a conventional credit card. The company undergoes a credit assessment and is assigned a credit limit for each corporate card.

Expenses are recorded on a monthly invoice, which must be paid by the company.

The benefits are:

• Greater spending flexibility, with an established credit limit.
• There is no constant need for refills.

On the other hand, it has these negative points:

• Risk of excessive spending without strict control.
• Requires a credit assessment and may be restrictive for some companies.

Postpaid cards can also be divided into several categories, depending on your company's needs. You can have a card designed for travel, or one designed for international purchases.

The postpaid card offers more flexibility in terms of choice. Likewise, it undergoes an evaluation with the company before approval.

Virtual Card

A virtual corporate card is an electronic version of a traditional corporate credit card. Unlike a physical card you can hold in your hand, a virtual corporate card exists only in a digital environment.

The virtual corporate card is issued electronically, often through online banking platforms or specialized financial services.

Instead of a number printed on the plastic, the virtual card has a unique number associated with it, which is used for online transactions.

There is no physical version of the card, making it ideal for online transactions or situations where a physical card is not necessary.

The Advantages of the Virtual Corporate Card are:

• Enhanced Security: Because the card exists only digitally, there's no risk of physical loss or theft. Furthermore, many virtual cards are temporary, expiring after a certain period or use, which increases security.
• Ease of Use Online: Ideal for online shopping, digital subscriptions, in-app payments, and other electronic transactions.
• Expense Control: It makes it easier to track and control corporate expenses, especially when used for specific purposes such as online subscriptions or digital purchases.

As disadvantages, we have:

• Physical Limitations: It cannot be used in transactions that require the physical presence of the card, such as purchases in traditional physical stores.
• Variable Acceptance: Acceptance may vary between different platforms and service providers, so it's important to check compatibility before using the virtual card.

The virtual corporate card is a convenient and secure option for many online business transactions, providing greater control and reducing the risks associated with physical card loss.

What is the best type of corporate card?

The choice depends on the company's specific needs, internal policies, and spending profile. Each type of corporate card has its own advantages and disadvantages, and the decision should be based on the company's objectives and operational structure.

Therefore, the company must analyze which type of corporate card will best meet its needs before placing the order.

What is a business card? How is it different from a corporate card?

Both types of cards operate similarly and share common objectives. The difference lies in the specific benefits offered by corporate cards, which are intended for companies with larger revenue volumes.

These benefits include not only annual fees, but also differentiated customer service and more favorable installment terms.

Thus, the corporate credit card is designed exclusively to meet the needs of large companies that enjoy a significant volume of revenue, providing them with specific advantages in terms of rates, personalized service and more advantageous installment options.

Who can apply for a corporate card?

Eligibility to apply for a corporate card generally varies depending on the policies and criteria established by the card-issuing financial institution.

In general, those who can apply for a corporate card are:

• Companies of different sizes, from small businesses to large corporations.
• Individual entrepreneurs who want to separate their personal and business finances.
• Non-profit entities, such as social organizations, charities, and associations.
• Individuals designated by the company to manage and use the corporate card on behalf of the organization.
• Employees authorized by the company to use the card for specific business expenses.
• Self-employed professionals who want to use a corporate card to control and separate their business expenses.

Is the corporate card worth it?

Assessing the viability of a corporate card depends on the company's specific needs.

The main advantage lies in more efficient expense control and simplified financial management, especially in organizations with multiple employees using the card. Furthermore, centralized financial control is a positive feature for avoiding disorganization in corporate finances.

Another point to consider is the possibility of additional benefits, such as rewards programs, travel insurance and special installment terms.

So, overall, the corporate card is worth it because of all the benefits it offers to companies, making it an excellent business management tool.

Did you enjoy learning about the corporate card? See more tips on the tools for your company page.