For many companies, corporate cards represent a simple payment transaction. They swipe and pay, and that’s that. So, what’s happening, truly? If you were a company spending six or seven figures on corporate cards like so many others, you’d be missing out on thousands of dollars in return. A year. A lot of money, sometimes tens of thousands.
The reality of reward programs is that what seems like basic math for an idealized program turns into real-world spending that begins to make sense when it’s actually run for a business. This is how many finance teams realize they’ve missed money on the table.
The Basics of Rewards
On average, a corporate card boasts anywhere between 1%-3% back on purchased spending. This seems fairly anemic until companies start assessing what they’re actually spending.
Take a company who spends $500,000 every year on corporate cards. At a base rate of 1.5% reward accrued, that’s $7,500 per year. Not lifetime changing, but free money. Instead, the reality of most spending revolves around choosing a card, swiping and not even realizing what potential they’re missing out on.
Spending in Different Categories Adds Up
When companies get cards, the first question is what category are they using it for? Travel often earns 3% or more; office supplies comes in at 2% minimum, while general spending and purchases, 1-1.5%. A medium-sized business with varied spending needs, from software subscriptions to client meals to employee travel, vendor payments and everything in between, can actually create a value structure to pay better for things strategically.
Where Spending Falls
Here’s where it gets practical. Most medium-sized businesses have spending patterns that fall into predictable categories. Understanding these patterns is what makes corporate card rewards start adding up in meaningful ways.
The majority of travel/entertainment expenses hit 15%-25% for companies with field associates or client-facing operations and software/subscription services can account for 20%-30% of monthly spend. Vendor payments, office purchases and simple-day-to-day-use transactions fill in the blanks.
Certain costs cannot or should not go onto a credit card, vendors who pass processing fees onto customers and those who don’t accept credit cards due to high-volume ordering, but for all the rest, the accumulation adds up.
Higher Earning Categories
For many companies, travel accounts for the highest potential yield of benefits. Airlines and hotels qualify for additional bonus rewards depending on the expenditure. If a corporation is sending employees to conferences and client meetings, the mileage could add up quickly, a corporate credit card with 4x or 5x points adds a serious value component.
When a business with strong travel needs spends $10,000 monthly on travel-related expenditures (meals at meetings even count often without needing to be on the personal credit side), at a 4% earned rate, that’s $400 per month and $4,800 per year, and that’s just one category! It’s easy to see how certain categories pay better than others.
Cash Back Vs Points Vs Miles
This is where different companies go their separate ways; some people appreciate cash back because it’s easy to understand and apply, while others like points or miles because they can redeem them for more down the line.
Cash back is straightforward, a hard 1.5% equals 1.5% returned in statement credit/deposit form. It’s easy to track against expenditures and budget accordingly. But points can be trickier (albeit potentially more valuable) through potential transfers to partners or redemption bonuses that push the value above the anticipated earn (albeit requiring someone with bandwidth to manage).
Medium-sized businesses don’t have extra time or personnel to pay a rewards program specialist.
All Most Finance Teams Want
All finance teams want is something that works without complicated parameters or someone to champion the course of action along the way.
In addition to simple cash back missed are the major sign-up bonuses that corporate credit cards boast and companies forget about, they look for banks that approve them, and fail to let their bank know how much they’re genuinely going to spend.
Spend $15,000 in the first three months of opening a new card? Earn an additional 50,000 points (worth $500-$750 depending on the program). For businesses going to spend that much anyway, this is free.
It requires strategic timing, opening a new card during a solid purchase cycle or opening one at the start of the budget season during meetings automatically helps hit those numbers within any allotted time frame.
What Cuts into Rewards
Annual fees are immediate costs associated with having a corporate credit card; annual fees can range from $0-$500+ annually per card; if a company has ten cardholders (not uncommon), that’s already straining potential profits although the basics make it worth it if the anticipated return outweighs what anyone is paying in fees annually.
Overseas transaction fees (or foreign transaction fees) impact companies operating outside of their home country; corporate credit cards might offer charges between 2%-3% per transaction, this means no one is reaping rewards, and it’s prudent to find cards that waive these fees if companies are paying international vendors or sending international employees onsite.
Late payment fees, interest charges and penalties for balancing debt totally skew any rewards programs that approach quarterly bonuses and upgrades, miss one payment and all redeemable points vanish in an instant.
It sounds obvious but you’d be surprised: medium-sized companies without strict expenditure management policies aren’t able to maintain organization.
Missing Revenue
Finally, if companies use corporate credit cards they need employees using them as much as possible, but this opens exposure/risk.
Some organizations solve this by giving cards only to senior personnel. Others use cards that have built-in spending limits with category restrictions galore if necessary to maintain control. The tighter your control is (like budgeting), the more disallowed where cards can be used until they aren’t worth it.
Where Should You Factor It In?
Multiply your total expenditures per year by your anticipated rate %. Subtract any annual fees; this is your perceived gain.
Then factor in any sign-up bonuses from new cards (usually one-time but solid value) and factor in any category bonuses you’re likely to hit by spending patterns.
The real question begs whether that total gain is truly worth your time managing the program over time vs training employees who need to reconcile rewards down-the-line?
For many medium-sized businesses, yes; a few hours of setup and quarterly reviews can yield several thousand dollars, even paying additional software subscription costs for a year out of bonuses alone.
Making Goals Accomplished
When a small-business owner makes those bonuses worth it, they’re meaningful, bonus points rarely cashed in aren’t valuable. Cash back lost in reconciliation does nothing either; when points translate into actual reduced costs somewhere else in the company automatically makes it worthwhile every time they plan ahead.
For medium-sized companies with consistent spending patterns, corporate credit card rewards may not be life-changing, but they’re not pointless either; they’re one more tool in a financial toolbox extending every dollar every way possible.
