A corporate card sounds like a great perk, but don’t forget the fine print.
Most importantly, you need to clarify whether you’re being offered a corporate card or a business credit card. They may sound like the same thing, but they’re actually a little different. One key distinction: Where business credit cards are concerned, employees are personally responsible if the company fails to make good on the payments; not so with corporate cards.
Corporate credit cards are a breed all their own. They come with some pretty nice benefits, but also a few drawbacks that are worth your attention. Consider these pros and cons before going all in.
Pros of a Corporate Card
1. Your Personal Credit Is Out of the Mix
When you receive a corporate credit card, the monthly bill goes directly to your employer. Your corporate card activity isn’t reflected on your personal credit report because your company takes full responsibility for any expenses you charge. Your only responsibility is to use your corporate card in accordance with your company’s policies. (Put another way: Keep all personal expenses off this card.)
Keeping work-related expenses away from your personal credit history has some other benefits as well. If you were to use a personal card, work charges would increase your credit utilization ratio (a.k.a., the amount of available credit you’re currently using). This ratio makes up 30 percent of your FICO Score. Translation: Carrying work debt from month to month could bring down your credit score.
2. You Don’t Have to Wait for Reimbursements
There’s definitely a convenience factor to having a corporate credit card. Using a personal credit card to pay for business expenses means waiting for your employer to pay you back.
“If you are flush with cash and can just pay it off and afford to wait for your reimbursement to come in, that’s not going to be too much of an issue,” says Beverly Harzog, credit card expert and consumer finance analyst for US News & World Report. “If you’re a person who lives paycheck to paycheck, waiting for that reimbursement can get a little dicey for you.”
3. The Card Isn’t a Concern When You Exit the Company
When the time comes for you to leave your company, your employer will cancel your corporate card. This won’t affect your credit, since activity on the card doesn’t show up on your credit report.
However, if you were granted a business card — which is connected to your personal credit history — closing down that line of credit would reduce your available credit limit and increase your credit utilization ratio. As a result, your credit score could fall.
Cons of a Corporate Card
1. You Won’t Reap Any Credit Card Rewards
Unfortunately, you probably won’t be able to cash in on any rewards you accumulate with your corporate credit card.
“Many people want to use their own cards because they can earn rewards,” Harzog says. With a corporate card, those rewards points just get funneled back to your employer instead.
“Some companies might make some sort of arrangement or exception,” she adds. “But, in general, you should not expect to be getting those rewards if you’re using a corporate card.”
In other words: Don’t plan to cover your next vacation’s airfare with miles accumulated from your business purchases.
2. You May Feel Pressured to Use It — Even When You Shouldn’t
Having a corporate credit card in your wallet does not give you license to whip it out whenever you want. Every company has its own set of guidelines around employee spending, and straying from them could put you in hot water.
“You’re held accountable for your expenses, even if you’re not filling out an expense report,” says Harzog. “If you can’t justify your expenses, it’s going to make you look bad and could put your job at risk, so practice setting boundaries.”
Corporate credit cards are nice in that they keep your work expenses separate from your personal spending and leave your credit score intact. The major downside is you’ll miss out on earning rewards. At the end of the day, only you can decide whether that’s a worthwhile trade.
Marianne Hayes is a longtime freelance writer and content marketing specialist.