What is a corporate credit card and how does it work?

If you own and operate a small business, you're probably familiar with business credit cards. But if your company is really on the up-and-up, you might want to start looking into corporate credit cards.

What's the difference? And how do you know if a corporate credit card is right for you? Keep reading for the answers to those questions and more.

What is a corporate credit card?

A corporate credit card is a card tied to a corporate account rather than to an individual. That means the business entity, not the business owner, is legally responsible for all charges made on the card.

Generally, corporate accounts are only available to businesses with annual revenue of $4 million or more, plus a track record of success and an established business credit history. If your business is an LLC, S-Corp or C-Corp with a solid business credit score and revenue in the millions, your company might be eligible for a corporate credit card.

Some corporate credit cards come with perks like points, miles or cash back. However, the biggest benefit to a corporate credit card is that individual employees can be issued their own cards to handle their work-specific business expenses.

Related: Business credit cards: What they are and how they work

Corporate credit cards vs. small-business credit cards

The primary difference between corporate cards and small-business cards is who is liable for debt and fees. With small-business cards, the primary cardholder is personally liable; with corporate cards, the company is liable.

Then there are rewards. With small-business cards, the primary cardholder earns rewards on the card. But on corporate cards, the company usually keeps the rewards — and generally the earning rates aren't as lucrative as you'll find on many small-business cards.

If employees are currently allowed to put business expenses on their own cards and then submit their business expenses for reimbursement, some employees may see the switch to a corporate card where the company reaps the rewards as a significant loss of benefits.

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Related: 9 reasons to get a business card

Do corporate credit cards affect personal credit?

In short, no. Corporate credit cards don't require a personal guarantee, so a credit issuer likely won't do a hard inquiry into your personal credit file. This means that you could have a low personal credit score and still have your business qualify for a corporate credit card.

On the other hand, if your business has bad credit or has only developed a limited credit history, you'll have a harder time.

Related: What credit score do you need for business credit cards?

How to get a corporate credit card

If you're interested in a corporate credit card, you'll generally have to contact a card issuer directly. Unlike consumer credit cards, corporate credit cards often have lengthy application processes, including documentation of a business's income and expenses. Your business may even be financially audited.

Bottom line

Small-business owners may be familiar with business credit cards, but corporate credit cards are more appropriate for businesses with annual revenues of over $4 million, a track record of success and an established business credit history.

A corporate credit card is tied to a corporate account, making the business entity, not the business owner, legally responsible for all charges made on the card. If your business is large enough to justify opening a corporate card, it may be worth doing so just for the sake of protecting yourself from personal financial liability.

Related: BILL Divvy Corporate Card review