By J.R. Duren
Over the past few years, the entrance of several new business credit cards and their corresponding rewards cards has given business owners a new incentive to rethink their petty cash strategies.
When it comes to managing employees’ expenses, this new generation of cards leverages the possibility of massive rewards as an incentive to choose a specific credit card company. But not all cards are created equal. Learn what to look for when choosing corporate cards for your employees.
Pros of Giving Your Employees a Corporate Card
From a rewards perspective, the greatest benefit to giving your employees business credit cards is that business owners reap the rewards of their purchases. The rewards earned from charges to the company card are applied to your rewards account, which means you can rack up frequent flyer miles, hotel rewards points or cash pretty quickly. Client dinners, travel expenses and hotel stays tend to offer bonus multipliers on your rewards points, meaning you’ll passively earn these rewards at a rapid rate.
In addition to this rewards-based benefit, you also have a nearly automatic way of tracking and organizing your business expenses. Your CPA will love the fact that you keep your business transactions separate from your personal ones, and that the employee reimbursement process is eliminated.
Cons of Giving Your Employees a Corporate Card
The big concern here is spending control. Not every business credit card allows you to set spending limits for employee cards, which means there’s a chance you could get an unwelcomed spending surprise on your statement.
Another downside to employee cards is also related to overspending: credit scores. You are responsible for paying the balance accrued by all cards, but if you have a rogue spender push you past what you budget for expenses, you might have to carry a balance. When that balance is added to the following month’s expenses, you’ll approach your credit limits faster and your credit scores will take a hit.
Choosing the Right Corporate Card for Your Business
One of the universal axioms of choosing the right credit card is to look at how you spend your money and what kind of rewards you value, as well as what kind of employee-card programs each company offers. Answer the following questions to help you decide.
- How Do You Spend Your Money?
This question is important because business credit cards tend to have their own mix of purchases that they incentivize.
A classic example of this is the comparison between the Chase Ink Business Preferred, the U.S. Bank Business Edge and the American Express Business Gold from OPEN.
All three cards give you extra bonuses on purchases, but which purchases get those bonuses is different:
|Level of Reward||Chase Ink Biz Preferred||AmEx Biz Gold||U.S. Bank Biz Edge|
cable/phone/social media and search engine ads up to $150K
|One of the following: ads/airlines/gas/
shipping/computer and software
|Cell phones/gas/office supplies|
|2x||None||The other 4 categories not chosen for the 3x bonus||None|
|1x||Everything else||Everything else||Everything else|
As you can see, each card offers triple the rewards on specific categories. They’re similar, but it takes a little research to know which cards will reward you most for your company’s typical spending habits.
- Which Rewards Do You Value?
Know which kind of rewards you value most: travel, hotels, cash or gift cards.
A card like the Chase Ink Business Preferred is ideal if you want to use your rewards for travel, because any points you accrue can be transferred to seven domestic and international airlines, as well as Hyatt, IHG, Ritz-Carlton and Marriott hotels.
However, you might want to take the cash, in which case any of the major business cards will be a good fit, because they all issue cash at a rate of $100 per 10,000 points.
Gift cards are a nice reward, too. An issuer like American Express, for example, has plenty of options for gift cards through their Membership Rewards portal, and they tend to be nice surprises for employees.
- What Are the Features of the Program?
Among the many popular business credit cards, two stand out for their ability to control certain aspects of your company card.
Wells Fargo Business Platinum has perhaps the most comprehensive employee card benefits. You can get up to 99 cards for free, as well as the ability to choose whether you want the cards to be lumped together into one account or divided up into separate accounts.
Wells Fargo also lets you customize your card’s design with in-house logos and photos.
What the program lacks is the ability for you to set spending limits on each card, a feature that you’ll find with the American Express Business Gold from OPEN.
Making the Right Choice
When it comes time to make your decision, take into account the three features mentioned here. Know where you spend your money, what rewards perks are most important to you and which card offers the best suite of employee-card benefits.
J.R. Duren is a HighYa.com personal finance reporter who examines credit cards, credit scores and bank products. J.R. is a three-time winner at the Florida Press Club’s Excellence in Journalism contest and his advice has been featured in MSN and Fox’s money sections.