Commercial debit and credit cards: What are they and how do they work?

Commercial cards are indispensable tools for helping businesses of all sizes accurately manage company purchases and operating expenses. The debit and credit cards are specially designed for corporate use, offering the business and cardholder various features and benefits. For example, you may get access to rewards programs, expense tracking, insurance coverage, and fraud protection through these cards.

According to a TD Bank business payment trends report  more businesses are paying with commercial cards. The truth is, commercial card adoption has partly been driven by the need to move away from cash and check payments.

Today, many organizations rely on commercial cards as a primary method of payment. The cards meet the growing requirement to consolidate your costs and exert more control over spending. 

In this article, we answer questions such as:

• What is a commercial card?
• What are corporate cards?
• How do commercial cards work?
• What is the difference between debit and credit card?
• Which is better – debit or credit?
• Why should your business adopt them?

What are commercial cards?

Commercial cards are payment cards that businesses distribute to employees for the purpose of making company purchases.

Authorized card/account holders can use their commercial card to:

• Pay merchants
• Settle work expenses such as travel or office supplies purchases
• Withdraw cash from ATMs

As a business owner, you can apply for and receive commercial cards from banks, credit unions, or other financial institutions. Some issuers may require your business to meet specific eligibility criteria, such as turnover certain revenue or employ a certain number of people.

The business may also need to undergo a credit check before being approved for certain products.

There are several types of commercial bank cards, including commercial credit cards and commercial debit cards. These work similarly to your personal plastic but typically come with additional features and benefits that are tailored to your business needs. For example, you may get the option to access:

• Higher spending limits
• Expense reporting and tracking abilities
• Specialized rewards programs
• Insurance coverage
• Cashbacks
• Fraud protection

Overall, commercial cards provide a simple, convenient, and secure method of managing company finances more effectively.

Types of commercial debit and credit cards and which one is right for your business?

Banks offer several types of commercial cards, most of which provide detailed expense tracking and reports for the business.

Within each category, the cards often have names based on corporate spending level. For example, you may have heard of platinum cards, gold cards, and silver cards.

Some of the common accounts include:

Corporate cards

Corporate cards are an option for employees who travel frequently and need to track and manage their expenses on the road. These typically have set spending limits and are used to pay for airfare, hotel stays, car rentals, and other travel expenses.

Importantly, corporate cards are often linked to rewards programs, where employees receive incentives to use certain vendors. A common example is a program that incentivizes corporate card members to purchase from a specific airline or hotel group when they travel.

Purchasing cards

Purchasing cards pay for business services, supplies, and equipment, including maintenance services, office supplies, computers, or furniture.

They also pay vendors and suppliers up to a certain amount. In this case, it is important for the employee to keep and submit receipts to the finance department to reconcile accounts.

Fleet cards

Fleet cards are designed for businesses that manage a fleet of vehicles. Account holders use these to purchase gas, oil, tires, and other necessary supplies and services, including repairs and maintenance.

Fleet cards also give the program administrator control over the types of goods purchased, where goods can be bought from, and authorized card members. This helps you optimize fleet usage and reduce costs.

Prepaid cards

Prepaid cards are suited to businesses with restricted budgets. A program administrator deposits funds onto these prepaid cards up to a certain balance. The employee has the option to spend this balance on purchases such as office supplies, travel expenses, entertainment, and subscriptions.

Virtual cards

Virtual cards are the latest in payment technology. They are digital cards that are usually linked to corporate credit accounts. Administrators create virtual cards to enable employees to settle online transactions.

They are typically created on demand and are often single-use or have temporary account numbers. Because of this, they offer a secure way to transact online.

How do commercial debit cards work?

A commercial debit card works similarly to a regular debit card, although it is designed with business needs and spending in mind.

These business cards link to a checking account and allow the employee to transact by accessing funds from the connected account. Payments may take place online or at a merchant’s POS system. The person may also withdraw cash.

When a purchase is made, the amount is deducted from the account’s available balance.
To help control spending and reduce fraud, you can set spending limits and control how, where, and when the plastic can be used.

Banks do not conduct credit checks before issuing debit cards. Nor do they charge interest on transactions.

Pros and cons of transacting with commercial debit and credit cards

Understandably, commercial debit and credit cards have their respective pros and cons. Here is an overview of what these might be:

Debit cards

Pros

• Prevent debt: Debit cards are linked to checking accounts and reduce the available bank balance. You can set transactional limits, so users never spend more than what’s available in the linked account.
• No annual fees: Banks typically don’t charge annual fees for debit cards. The amount is already built into the account fee.
• Suitable for smaller purchases: Commercial debit cards are ideal for smaller transactions that don’t considerably impact your company’s budget or financial standing.
• Easy to acquire: Since debit cards don’t require you to borrow from the bank, they are easy to get, even without a good or existing credit score.

Cons

• Limited access to funds: Debit cards only allow you access to spend what’s already in the bank account or up to a certain limit. This can be a problem if you need to make an emergency purchase and don’t have the funds available.
• Overdraft fees: Most banks charge overdraft fees if you spend more than is available in your account. This can cause unnecessary financial strain.
• Complicated for big-ticket items: Banks often apply additional layers of security to debit cards. You may need to get pre-authorization to transact in higher amounts. There may also be spending limits within a certain time frame.
• Require a PIN: Although this could be an extra layer of card security, forgetting the PIN can be very inconvenient.

Credit cards

Pros

• Instantly detect transactional irregularities: Real-time transactional notifications alert you to any irregular or fraudulent activity on the account, such as unauthorized purchases or credit card chargebacks.
• Build a credit score: Utilizing company credit cards can help your business build its credit score. Banks often report your spending activity to the credit bureaus that compile your credit score.
• Access rewards programs: Many credit cards offer rewards programs, such as cashbacks or airline miles. It is a great way to save money on purchases and travel expenses.
• High spending limits: The credit line allows businesses to make higher-value purchases or pay for unexpected costs easily. This can improve cash flow and provide a source of temporary funding.

Cons

• Potential for overspending: Although convenient, access to a credit line can make it very easy to spend more money than you have. This can lead to debt if not managed properly.
• Potential for fraud: Fraud on credit cards has potentially high ramifications for your business. If account information such as digits is stolen and transactions take place, it can put your business in debt. Furthermore, the resolution process to get your money back is complex.
• Can hurt credit: Failing to pay your credit account’s minimum required balance on time can negatively affect your credit score. This could prevent you from securing loans or other financial services in the future.

How to choose a commercial card provider

There are several deciding factors for selecting a suitable provider. Below are some key considerations to keep in mind:

Fees and interest rates

Compare the fees and interest rates of the providers you are considering. What do they charge for annual, overdraft, late payment, and cash advance fees?

Also, find out whether there are other charges for utilizing the services that you may not be expecting.

Make sure the charges are reasonable by industry standards and in line with what your business can afford.

Rewards and incentives

Look out for providers that offer rewards programs that benefit your business and the card members.

Rewards such as cashback, discounts on products or services, or redeemable points can be incentives to use your debit and credit cards more frequently. In turn, the corporate cards can offset some of the costs of having the account.

Security and fraud protection

Ensure that the provider offers solutions for fraud protection. Check for corporate card and banking features such as encryption, two-factor authentication, and chip technology to stop unauthorized access.

Credit limit and accessibility

It is essential to select a commercial card provider that offers a reasonable credit limit for your needs and an easy way to access funds.

Some providers may offer additional features and allow you to set spending limits and restrict certain categories of purchases.

Reporting and analytics

Reporting and analytics features provide valuable insights into the spending patterns of your business. The information you get can help to optimize spending, improve budgeting, and track expenses.

Providers can offer you the following functionalities and services:

• A detailed transaction history – track all transactions, including date, time, amount, and merchant information.
• Customizable reporting – generate reports based on specific criteria, such as date range, merchant, and spending category.
• Budget tracking – monitor spending against budgets and track over or under-spending.
• Spend analysis – a breakdown of spending by vendor, category, or location.
• Fraud detection – advanced fraud detection to alert you and help prevent unauthorized transactions.

Customer service

When selecting a suitable provider option, it is important to evaluate their customer service level. Look for providers that have a knowledgeable and helpful team available to answer questions or provide assistance when needed.

Also, ensure they have a comprehensive help center with detailed information on the features and services they offer.

Integration with accounting software

Finally, it is essential to consider how easily the provider integrates with your existing accounting software.

Can you access features such as automatic payments, data import, and link multiple accounts for seamless transactions?

What do commercial cards offer businesses?

Commercial debit and credit cards offer several features and benefits to your business, such as:

Advanced security features

Access advanced security features, such as chip technology, two-factor authentication, and fraud detection to protect against unauthorized financial access. This helps keep your information secure and reduces the risk of fraudulent activities.

Detailed purchase tracking and reporting

As mentioned, commercial card providers offer detailed expense management tools. You can use these to monitor and report your purchases and spending patterns, track expenses, and identify areas for financial improvement in your business.

These tools include graphical representations and interactive dashboards, making it easy to analyze your data. You can access the tools online or via a mobile app and build detailed reports that drive short and long-term business decisions.

Rewards and incentives

Many commercial card programs offer rewards for spending in certain ways.

For example, you can receive cash back, discounts, statement credits, and points for transacting at specific retailers or suppliers. In turn, the rewards can be redeemed against future company expenses or purchases.

The result is that your business can save money on everyday transactions while cardholders are encouraged to spend optimally.

Credit building

Using a commercial card responsibly can help your business build its credit score. This is especially helpful if you are just starting out. It will enable you to apply for better loan terms and financing in the future.

Additionally, good credit standing can help your company access more favorable terms from suppliers and vendors.

Convenience

Commercial debit and credit cards provide your business with a level of convenience. Cash can be difficult to track and adequately account for, and checks take days to clear and reflect. On the other hand, debit and credit transactions are processed in real-time.

Using plastic also excludes the security risks associated with carrying cash or checks.

This applies to the merchants, vendors, and suppliers you transact with. Many prefer not to accept cash or checks and only take corporate card or ACH payments.

Control and oversight

Commercial cards provide you with greater control and oversight over your business finances and employee spending. You can set spending limits, monitor transactions, and track purchases in real-time. This will help you keep a closer eye on finances and identify potential areas for saving money and improving efficiency.

Unlock the potential of the Payoneer card for your business

Payoneer is a payment service provider that offers businesses various payment solutions, including the Payoneer Commercial Mastercard®*. It is a powerful tool for businesses to manage their expenses. The card comes with the host of benefits:

*Disclaimer: The Payoneer card program offers 2 types of card services: the Payoneer Business Premium Debit Mastercard® issued by Payoneer Europe Limited under a license by Mastercard and the Corporate Purchasing Mastercard issued by First Century Bank, N.A pursuant to a license by Mastercard and provided by Payoneer Inc. to its eligible customers.

Pay for business expenses anywhere Mastercard® is accepted

The Payoneer card, powered by Mastercard®, gives you the freedom to pay for advertising, bills, contractors, shipping, or fulfillment services across 190+ countries. This means, you can operate your business globally, no matter where you are.

Save time and money

Experience effortless savings by using the funds in your Payoneer balance to pay for business expenses in USD, EUR, GBT, or CAD, without any concerns about withdrawal or conversion fees. Plus, with faster funds transfer times, you can operate much quicker and keep your business moving forward.

Streamline your business finances with multiple virtual cards

Order several commercial cards to keep your business expenses organized, helping you better manage your cash flow. You can order both a physical card or virtual cards.

Scale your business faster with high spending limits

With daily spending limits of up to 200,000 USD and no monthly cap, the Payoneer card lets you invest in growing your business while providing the flexibility to pay for any business expense, whenever you need it.

Only pay periodic fees for one card

Fees can quickly add up. But with Payoneer, you’ll only need to pay a periodic fee for your first card. The good news is that for any additional cards, you won’t have to pay this fee**.

**Disclaimer: not including any fees/costs associated with card shipment and delivery, or fees/charges applied for transactional use of the card (such as per transaction fees and ATM withdrawal fees). Full fee disclosure will be provided during the card order/activation process.

Enjoy great customer support

Our dedicated customer service team is available to answer your questions and provide assistance as needed. Simply access the live chat feature when you are logged in.

Otherwise, we have an extensive library with help articles to assist with the most common queries about debit and credit cards we receive from our customers.

Track card expenses on your Payoneer account

Log in to your Payoneer account to view all your card transactions and manage your card settings. Whenever you perform a transaction, the details appear in your account.

You can also automatically sync card transactions for your payments and expenses with Xero and QuickBooks Online. This automates data entry to your accounting platforms for simpler transaction reconciliations.

Final thoughts

The Payoneer card is one of Payoneer’s innovative payment solutions. Now that you know what commercial cards are, how they work, and the debit card and credit card difference, use this information to partner with the right provider for your business.