Most people refer to credit cards that are used by businesses as "corporate cards." However, corporate cards are actually just one of many different types of commercial cards. The main differences among these cards concern what types of spending controls and reporting are available.

To understand commercial cards, think of them as a charge cards or credit cards issued on the basis of a company's credit rather than the credit of any individual. These cards are designed to be paid by a business, although employees can carry and sign for charges whenever necessary.

This buying guide is designed to help you learn the facts before choosing a commercial card. You can choose to read this guide from beginning to end, or jump directly to a section of interest by clicking on the links above.

Advantages

One of the main advantages of using a commercial card is that it helps businesses to establish a credit history. This can be useful when applying for credit from other vendors or when seeking a loan.

Commercial card products also offer a greater level of control and oversight than consumer credit cards. With these cards, businesses can set credit limits on individual cards, or specify how spending should be broken down for analysis.

Finally, companies can take advantage of the many discounts associated with using commercial cards. Typically, discounts tend to focus on purchases related to hotel, car rental, office supplies, and shipping.

Types of Cards

Business cards are a type of commercial card that is geared to meet the needs of small and medium sized companies.

This typically means firms that spend less than $1 million per year on purchases and have fewer than 100 employees that will use cards.

In contrast, three cards are designed with the larger business in mind.

Corporate card.

A type of commercial card that is marketed to companies that spend a minimum of $1 million yearly on purchases.

Purchasing card.

A kind of commercial card that is marketed mainly to larger companies. Purchasing cards are specifically geared to streamline small-ticket purchases by placing tighter controls on spending and allowing for more detailed reporting than do other types of commercial cards.

Fleet card.

A type of commercial card that is marketed mainly to larger companies. Fleet cards offer unique tools to help manage fleet-related expenses such as gas, maintenance, and repair. For instance, spending can be restricted so that only fuel and/or maintenance costs can be charged. In addition, cards can be assigned either to the driver or to the vehicle.

Tracking Charges

The basic reason for switching to a commercial card is to minimize the effort required to track corporate expenditures. Commercial cards track spending through billing and management reports.

There are two types of monthly billing options available to your business: central billing and individual billing. Central billing consolidates all employee charges into a single bill, while individual billing issues monthly statements to each cardholder.

Management reports are issued on a monthly, quarterly or yearly basis. They allow firms to easily analyze spending and catch aberrations or problematic overspending. Depending on the report, the data can be analyzed by such variables as cardholder, city, type of spending or vendor.

Minimizing Your Exposure

To protect businesses from cardholder misuse, both MasterCard and Visa have liability waiver programs.

These programs waive up to $5,000 per card for companies that have between 2 and 4 cards, and up to $15,000 for companies with 5 or more cards. Both of these programs are contingent on the adherence to specific requirements, such as, for example, the termination of the employee who misused the card.

Pricing

The bulk of your costs will stem from annual card fees and interest rates. You'll also want to watch out for punitive fees, which can add up if you are not careful.

For businesses that pay off their balance in full each month, annual card fees may be the most expensive part of owning a business card. On average, card fees range from $20 to $65 per card.

If your company expects to carry over a hefty balance each billing period, finding a business card with a low interest rate is absolutely essential. Currently, business card interest rates range from 14-19%.

Card issuers often offer several different interest rates to companies, depending on such factors as credit history, number of banking relationships, and spending volume. As a result, it pays not only to research interest rates for a number of different cards, but also to inquire about whether your company could qualify for one of the lower rates offered by the same card issuer.

Qualifying for a Card

To increase the likelihood of getting approved for a card, make sure to get a clear understanding of what factors will be considered when your application is reviewed.

Card issuers tend to place a heavy emphasis on the credit history of the authorizing officer applying for the card. In addition, certain card issuers may also request copies of business financial statements or tax returns.

Finally, just because your company is rejected by one issuer that doesn't mean you will be rejected by all. Applying for several cards may be your answer.

Buying Tips

Lower card fees

Look for card issuers that offer no card fees for the first year. Also, try to negotiate card fees based on your annual expected spending volume.

Billing statements

If you choose to have your billing statements consolidated into a central bill, make sure that individual statements can also be sent to employees for review.

Watch out for "too good to be true" interest rates

Some card issuers offer low introductory interest rates for a limited time frame, usually for 6 months. Afterwards the interest rate returns to its normal rate, which may or may not be competitive. Therefore, make sure to find out what the standard rate is before being taken in by low initial offers.