Who is liable for a corporate card

When it comes to who is responsible for making repayments, different corporate cards have varying rules. For this, business owners need to understand and get a clear idea of how liability can be determined and applied. 

How a corporate card liability functions 

Whether it is making payments for technology subscriptions, restocking office supplies, or securing booking for business trips, businesses have to carry out numerous transactions on a regular basis. Corporate cards enable employees to charge their authorized expenses to the company without filling out the lengthy claim forms. 

But how your business members use their corporate cards varies based on its liability. Liability regulates the people who are responsible for making repayments on a corporate credit card. Based on the terms, the corporation or the particular employee is held responsible for clearing the balance. 

Understanding individual liability card 

An individual liability card allows employees to make payments directly to the issuer for every transaction they have made on the account. After that, they need to submit an expense report for receiving reimbursement from the employer. All the corporations that have individual liability cards must outline the expense reporting procedure in their corporate card policy. It must comprise the monthly dates on which the employee has to submit their expense reports and details related to the type of receipts required. 

They must also outline spending limits, authorized usage, and general terms of use. Another benefit of individual liability is that employees tend to be accountable for their business transactions since they have to make payments for them out of their own pocket. It helps in minimizing the risk of getting corporate cards misused. Authorized cardholders can be subject to a credit check that might affect their personal credit score, which is temporary. In the case of erroneous expenses rejected by the company and left unpaid might take the form of credit card issuer reporting the person to the major credit bureaus. 

Understanding corporate liability card 

The accountability of making a repayment on a corporate liability card is completely on the company. Since employees don’t have to pay upfront for their expenses or keep on waiting on repayment, it provides employees an increased financial relief. In that case, the employer has to pay for all the approved transactions. 

However, corporations that have corporate liability cards have to give their employees a clear policy. Businesses can also utilize expense reporting to get assistance with reconciliation at the completion of every billing cycle. Issuers can’t review credit checks on authorized holders of a corporate liability credit card, but employees can see their own credit affected in case of erroneous expenses are unpaid.

How to handle corporate card misuse?

Corporate cards accompany countless benefits, but if business owners are not careful enough, it might leave businesses vulnerable to misuse of the corporate cards. With this, they’ll have to undergo huge business losses and even put their clients at risk.  

Your employees and business members might overspend, submit erroneous expense reports, or even make unauthorized transactions. At this point, business owners can minimize these risks with report procedures and clear policy implementation.  

How you can mitigate the risk of corporate card misuse 

For minimizing corporate card misuse, corporations must only issue corporate credit cards to dependable employees and issuers must have the minimum requirements of 15 cardholders. However, it is safe to limit the number. The employees who carry out business transactions very often would need one and they must not share it with anyone else. Moreover, you must clearly acknowledge all the business members with the corporate credit card policy so that they have a fair idea of which transactions are authorized and how much they can spend every month. You must outline the outcomes of misusing and be aware that those who are in violation often get dismissed and prosecuted. 

To minimize the misuse, you must set spending limits and restrictions on expense categories. Usually, corporate card issuers give you access to set terms for every employee so that they gain access only to those funds that they require. Going for corporate cards with joint liability encourage employee accountability. Employees need to be accountable for paying credit card transactions on their own. Business owners further reimburse them upon the submission and reviewal of expense reports. You must ensure that employees have original receipts and submit their expense reports before hitting the deadline. 

By reviewing corporate card usage from time to time, businesses need to recognize suspicious activity to stay on the safer side and reduce corporate card misuse in the long run. The card issuers might also notify the corporation on time and even set alerts of substantial or unusual transactions. 

There are chances that despite the preventative steps taken by business owners, corporate card misuse can still occur. So, in case you find any business member violates the terms of their corporate card, you must take suitable actions right away. For this, you need to check statements, receipts, and expense reports for regular violations and take rapid actions. 

The functioning of a virtual card

In the digital world, hackers have endless ways to gain access to your hard-earned cash in no time and hamper your business and customers overnight. With the growing frauds and malicious activities globally, businesses are making an upgrade from traditional debit and credit cards to virtual prepaid cards. Virtual cards are the ideal solution to address all such frauds and other probable hacking attempts.  

Understanding virtual prepaid cards 

Virtual prepaid cards are basically debit cards that are not physical cards and can be bought online. Users can put money in an online account and generate disposable card numbers to be utilized for online purchases.  Virtual prepaid cards give high-level security and safeguard your business and customers at the global level.  

Whenever a person applies for a virtual prepaid card, a physical card isn’t sent unless it is requested specifically. Rather, a virtual number is assigned to the person and the 16-digit number is used just like a credit card is used online. The person needs to directly enter the virtual card number, the expiration date, and the security code in order so that the payment is processed successfully. 

How virtual prepaid cards function? 

A virtual prepaid card isn’t connected to a physical card; however, it is directly related to actual money. Rather than being linked to the bank account or high credit limit, a virtual prepaid card just has the number of funds available that are chosen by the person. All the reloadable accounts get filled on a prepaid basis and the person has the authority to entitle the amount of money that can be allocated to the virtual prepaid card. 

In case the transaction is exceeding the amount of money in the account, it can’t be further processed. Users can easily reload and add more money to the card in a few taps of a button and after depositing funds on their card, they can use their virtual card number for making purchases online. The virtual card number is linked to the virtual account under which the payment is processed further. 

Virtual prepaid cards are the ideal method for safeguarding and offering next-level security to protect business assets and allow them to purchase services and goods online. No matter businesses are on the hunt for secure business or individual payment solutions, TERA can assist all sorts of businesses with virtual prepaid card options for safeguarding their businesses in the long run. 

What is a line of credit?

Whenever people need money, seeking a line of credit is usually the last option they can opt for. A line of credit is basically the preset amount of money that a bank agrees to lend an individual. The person can draw from the line of credit whenever he needs it up to the maximum limit set and further, he’ll have to pay interest on the amount he has borrowed.  

So, the line of credit grants people access to money “on demand” and helps them with expenses such as unplanned car maintenance or a home project. The line of credit is offered by lenders like credit unions or banks and if the individual qualifies it, he can easily avail of the maximum amount for the set time period.  

How a line of credit works? 

Whenever an individual applies for a line of credit, having a good credit score is quite helpful in qualifying for a lower annual percentage rate and few lines of credit charge annual fees and have limits on the amount that can be borrowed. Once the person qualifies for the line of credit, he gets a particular time frame, which is referred to as the ‘draw period’ under which he can draw money from the account. The draw period can last for a number of years.                        

Once the person borrows the money from his line of credit, interest beings to accrue and he’ll need to begin making at least minimum payments. This amount is added back to his available line of credit as he makes it; however, as his draw period ends, the person enters the repayment period, where he’ll have a set time to pay off any remaining balance. In case the person keeps on paying the only minimum payment, be prepared to pay more interest in the long run. 

Secured V/S Unsecured Lines of Credit 

In a secured line of credit, the account holder needs to give some valuable asset (in the form of property, company, or some equipment) as collateral for getting the credit. In that case, the valuable asset must be equal to or more than the value of LOC’s maximum limit. Secured lines of credit ensure higher credit limits and competitive interest rates as there is no risk in this scenario. Under a secured line of credit, in case a business defaults on payments and the lender seizes the collateral, the borrower has the authority to designate his assets for possession. 

In an unsecured line of credit, the borrower doesn’t have to provide any collateral and it is ideal for businesses who need smaller credit limits up to $100,000 as it has lower maximum limits and higher interest rates. Under an unsecured line of credit, the lender can seize personal assets for the outstanding payments if the borrower fails to provide the funds. 

Who can qualify for a business line of credit? 

In order to qualify for a business line of credit, the company owner must show give evidence of having a minimum of $50,000 in annual revenue, a personal credit score of 550 at least, and must have at least one year in business. Businesses with lower credit history can apply for a short-term line of credit and these options are helpful for improving a business’s creditworthiness so that they can qualify for long-term lines of credit in the time ahead.