For more than 70 years, enterprises of all sizes have used commercial payment cards to purchase everything from airline tickets to office supplies. This flexibility has led solution providers to launch numerous card products in the intervening decades. Today, there are cards to manage corporate travel, cards for purchasing, fleet cards for transportation, ghost cards linked to central accounts, virtual payment cards, and even declining balance cards for specific expenses.
It’s enough to make any enterprise suffer from an overabundance of choice. Luckily, each of the card products tends to have a specific use-case, so the question of which one to use really comes down to the needs of the enterprise. To illustrate in more detail, I discuss below each of the card types enterprises are likely to find.
Corporate Travel Card
Alternately known simply as a “corporate card,” this type of commercial card is designed expressly to manage travel and entertainment expense programs. The corporate card is the oldest commercial card type in existence, having gotten its start in 1936 with the Air Travel Card (now the Universal Air Travel Plan). Today, credit card issuers such as JP Morgan Chase, Bank of America, Citigroup, US Bank, American Express (which also doubles as a card network), and Citizens Bank all offer corporate travel card programs to the enterprise market.
Corporate cards across the board share some common features: oversight for program managers, spending controls, reporting and analytics, and integration into back-end financial systems like the general ledger or ERP system. Many card issuers also offer what’s called an “Executive Card,” which is a variation on the corporate card that offers additional perks such as airport lounge access.
Purchasing Card (“P-card”)
The p-card first came about in the 1980s after the corporate card’s success in travel and entertainment expense management. The p-card is distinct from its older cousin in that within large enterprises, it’s used primarily for lower-value purchases that don’t require contracts or purchase orders like those in the complex spend category. Think of office supplies such as printer paper, toner, or coffee for the break room. For many small and mid-sized enterprises, p-cards serve as the enterprise’s de facto purchasing system, providing visibility into spend while also greatly reducing the number of supplier invoices. The rebates generated by these cards are also an attraction.
A p-card is usually a physical, plastic card with flexible spending limits, a monthly billing cycle, and the requirement that the bill be settled in full every month. Some solutions also offer a percentage rebate on payments made with p-cards. For the accounts payable team interested in managing spend for day-to-day expenses, the p-card is probably the way to go. Solution providers offering p-cards include JP Morgan Chase, Bank of America, US Bank, American Express, Citizens Bank, Citigroup, and Commerce Bank.
Fleet Card
A fleet card is a special-purpose card designed to help manage transportation and logistics expenses. Fleet cards are commonly found in enterprises that either have fleets of commercial trucks or provide company cars to employees for one purpose or another. A cable-service provider or a retailer may provide specialized fleet cards to truck drivers or field service professionals, for example.
Fleet cards typically include fuel rewards and purchase controls that allow program managers to place strict limits on the cards based on a specific timeframe. Some solutions also allow program managers to force drivers to enter a specific PIN, as well as limiting the cards to particular employees. US Bank, Comdata, JP Morgan Chase, and VISA are some of the solution providers with fleet cards on offer.
Declining Balance Card
The declining balance card is different from other commercial cards in that it doesn’t require a pre-funded account. Generally these are organized with a set expiration date and/or spending limit up front, which gives the card a “shelf-life” of sorts. Solution providers such as Citigroup, JP Morgan Chase, and American Express offer declining balance cards in the form of Meeting Cards and Project Cards, which allow for non-standard expenses devoted to one particular event—a project or a meeting—to combine onto one single card product, rather than be roped into the purchasing card and/or corporate card. The US Bank “Managed Spend” card is another example of this card type.
The ONE Card
With all these card products, it’s entirely possible for enterprises to use multiple card types within the same accounts payable workflow. There could be a corporate card for travel, a p-card for office supplies, a fleet card for transportation and logistics, and even one of the declining balance card types on the same books. As a result of this possibility, solution providers such as Bank of America, Citigroup, JP Morgan Chase, Commerce Bank, Comdata, and Wells Fargo offer what’s called a “ONE card.”
Appearing in the 1990s, following the success of the p-card, ONE card solutions blend the aspects of a purchasing card and a corporate card. This allows enterprises to use a single card product for all appropriate expenses and still receive the benefits associated with both p-cards and corporate cards. Depending on the solution provider, ONE cards are alternately known simply as “commercial cards.” Regardless, a ONE card combines all travel, purchasing, and fleet payments onto a single card product.
Ghost Card
A ghost card is a non-card account, linked to a preferred supplier, where the seller initiates payment. Ghost cards are essentially account numbers linked to high-limit charge accounts that buying organizations use to conduct a high number of transactions. Ghost cards are useful for controlling expenses because multiple employees can charge the same account without the AP team needing to issue a lot of physical credit cards.
One of the most common use-cases for a ghost card is in corporate travel. After the introduction of more corporate travel cards in the 1970s, enterprises became wary of offering cards to all traveling employees—the ghost account was created to alleviate these concerns. JP Morgan Chase, Citigroup’s Central Travel Account, and US Bank’s Travel VirtualPay are just three examples of ghost accounts that operate as card products.
Virtual Cards
The last common type of commercial card is what’s called a “virtual payment card.” Like a ghost card, there’s no physical card with a virtual payment card. Rather than send a check run file to a provider, the buying organization sends a virtual card payment instruction file. Account numbers are essentially dormant until the payment instruction is sent, which specifies the authorized payment amount, the payment date range, and the supplier.
Virtual cards come in different flavors: there’s dynamic credit adjustment accounts, which have a zero credit limit so suppliers can’t authorize payment until receiving a notification that the account limit has been raised to the approved payment amount (and are assigned to preferred suppliers); single-use accounts, which are assigned on a per-payment instead of per-supplier basis; and buyer-initiated payments, which allow for buyers to “push” payment to a supplier’s account.
Solution providers as varied as JP Morgan Chase, Citigroup, Comdata, US Bank, and NVoicePay provide virtual payment card functionality, with each solution provider deciding separate from the others which type of virtual account is on offer.
Which One Works Best?
The short answer is: “it depends.”
Each commercial card type comes with strengths and weaknesses, as well as specific tasks that it does better than the other types. Consistent low-value purchases are best served with a p-card, while an outside sales staff would probably benefit the most from a corporate card. A declining balance card is great for the one-off, non-standard expenses associated with corporate meetings or major projects; a fleet card shines in managing the operations and maintenance of company cars and/or delivery trucks.
Should you decide to launch a card program—with its associated fees and other drawbacks—the specific needs of the enterprise must factor into play. Think long and hard about why you’re launching a commercial card program, and what type of expenses need management, before taking the step of choosing a card type.
Final Thoughts
Commercial cards have shown value since the first corporate cards launched in 1936. From travel and expense management, to buying an office’s coffee and tea, enterprises use all sorts of commercial cards in all sorts of ways. That doesn’t mean that picking a commercial card is an easy thing. When it comes to providing a card product to employees, it’s incumbent on the AP/finance team to figure out what their core goals are before moving forward.
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