Virtual cards vs company cards: Which is best for your business?

This is a major issue that is most of the time overlooked by many company managers. There is some amount of control you can exercise on the spending limits of a company credit card however, it is still difficult to see that the purchases made from the cards are genuine and from trusted suppliers or merchants.

To avoid this problem without changing the card form the best you can do is, clearly instruct your employees to purchase only from a particular vendor or they can spend only a specific amount of money. Even after this, there are chances that some of the company employees may purchase unauthorized items and it will only be at the end of the year that you’ll get any information related to that purchase.

This is another major issue that occurs every now and then. Many companies do not identify the blurring boundaries between business and personal expenses. There is a great possibility that your team members or employees write off personal expenses as business ones on the company card very easily because there isn’t any strong method of detecting these kinds of expenditures if your business uses company credit cards. 

Missing payments or paying business due late is not an appreciated practice, in fact, this can cause serious damage to your company profile by decreasing the business credit score. If the payments are delayed more than 30 days, there is the possibility of losing up to 83 credit points, and if the delay is more than 90 days the credit score can drop from 27 to 133 points. Although if the payments are made in less than 30 days your company doesn’t lose any points or won’t see any drop in the credit score.

Payments made within 30 days or before the due date displays your company as an authentic business. With company cards, the task of keeping up with payment deadlines becomes immensely difficult because there is no automatic reminder or notification feature entailing it. To get reminders you will have to set calendar popups or email reminders.

It is comparatively very simple to keep a track of all your subscriptions and personal payments in your head because you as an individual person would have a small number of obligated payments to take care of in contrast to a business. So maybe you have Netflix, Gym, Spotify, and insurance subscriptions which can easily be kept in mind. 

However, when it comes to a business it's a whole different arena. Your business uses numerous subscriptions for various tasks. For a quick progressing startup or small business, these numbers may be in the hundreds. To get an idea of the amount of money being spent by each team, ask the members of the head to give you a number. Most probably you won’t get this answer in 10 minutes. 

Now, this more than 10 minutes should not be taken because subscription payments or vendor payments are recurring and can be easily tracked through a company card by your bank. However, it takes more time because the whole process is designed in such a way that it becomes very difficult to access data.

It is commonly known that credit cards are issued with a certain spending limit. While using a personal credit card this limit isn’t a big deal because how can you spend from your monthly salary or what is your individual monthly budget. But when it comes to businesses, the case becomes complicated. Different departments have distinct requirements, the tech team may buy some equipment.

However, they may not realize that there is another big payment coming from the hiring department. The company credit card will max out and one of the two will have to wait for the next month. There are so many major and large expenses made in a business simultaneously that your company card is bound to max out and this creates roadblocks for departments that weren’t able to get the resources. 

Taking a cash advance is one of the most precarious things to do with a company card. From the very time to withdraw cash, interest starts accumulating on that cash amount and remember there is no grace period. Along with this, you may have to pay a cash advance fee which can be up to 5% of the withdrawn amount.

What if there is some unofficial or unauthorized purchase made on the company card. How quickly do you think you’ll be able to detect it? These company card breaches are not only hacks but also include employees buying non-business-related items and sanctioning them as business expenses. Due to the lack of any strong real-time tracking system or any feature that would ensure transparency, it becomes extremely challenging to spot any fraudulent payments. 

These forbidden expenses only come to notice until the end of every month. Still, you are able to track down who made the fraud payment. Everyone would already have access to the card and a strict regulatory measure may work to some extent but won’t eradicate the problem from its roots.

After the detection of some fraudulent activity on the company credit card, the best solution you can adopt is to cancel that card. But canceling the card would mean that all your recurring subscription payments will be declined. Someone from the team will have to login into all your business accounts like HubSpot, LinkedIn, GoogleAdWords, and a hundred others again to add the new company credit card credentials.

The whole system will have to be reset to get everything back to normal, which would involve buying a new company credit card and putting people to do the reset. This also means that you will discover some tools you didn’t even realize you had subscriptions for until the payment fails. Plus there will be many emails asking for the new subscription credentials. A clear chaotic situation. As an easy solution for all these problems virtual cards were invented.