Corporate Cards – Which one is the best option?

Trent Green is our special guest today giving us insight on the differences between corporate cards.  Trent is Oakworth’s Managing Director, Treasury Management.

Although the world of corporate payments is always evolving, bank and non-bank issued cards are still a main form of accessing capital for many companies.  Cards offer users the ability to access credit or cash with relative ease, allow for easy tracking of transaction items and offer certain security elements not found with other payment methods.  Even with the convenience offered by using cards, they are not without their own unique set of problems such as vendor acceptance.  Credit cards were initially developed in the 1950’s and debit cards began gaining prominence in the 1980’s and since that time other card types have been developed to meet specific niche needs.  For most companies however, one of three card types will meet their needs:

  1. Credit Card– Most consumers and businesses are familiar with traditional credit cards and how they operate.  With a traditional credit card, an applicant applies for credit and if approved, is issued a credit limit.  The credit card will allow transactions up to the credit limit and will deny transactions that exceed that limit.  At the end of each billing cycle, usually monthly, a statement is issued with the “Amount Due” and payment date included.  Most businesses choose to pay credit card balances in full each month, thereby lowering the cost of capital.  Cards can be issued to one individual at a company or to multiple employees with access to a corporate credit limit or each having a specific limit.
  2. P-Card– A P-Card, otherwise known as a Purchasing Card, is similar to a traditional credit card but with a few key differences.  A P-Card operates on an approved credit limit the same as a credit card but it has more control and reporting features.  A P-Card provides the ability for a business to issue cards to employees and to assign each employee a credit limit as long as it falls underneath the business’ main limit.  Card managers can also increase and decrease the credit limit associated with each card as needed and to restrict access to certain types of businesses, such as liquor stores and gaming sites.  Outstanding balances are usually paid monthly, also reducing the cost of capital much like a credit card.
  3. Business Debit Cards– A Business Debit Card allows a business to initiate purchases and cash withdrawals by directly accessing cash on hand in a checking account.  Although transaction processing is similar to that of credit cards, debit cards have preset transaction and daily limits and are further limited by the balance in the associated checking account.  Debit cards, in general, offer less protection and have greater liability for the user than credit cards.  Even with the associated caveats, Business Debit Cards are an effective tool in the right situations.

Oakworth Capital offers all three options and each contain certain bells and whistles that may be of value to a business.  To help navigate the best solution for your business, please contact your Oakworth Capital Client Advisor to learn more.