Corporate Credit Card Limit: How Is It Decided? How To Expand It?

Corporate credit card

Companies issue corporate credit cards to employees to make business purchases. This could be associated with business travel, client entertainment, or supplies. The company then pays for these expenses. Corporate credit cards ensure that expense tracking and reimbursement processes are streamlined. 

Over 50% of small businesses use corporate credit cards as external funding sources. These credit cards often come with limits enforced by the lender. But if you’re using it as a funding source, you might want to increase the corporate credit card limit. So, how can one do that?

Continue reading as we take you through the ins and outs of corporate credit card limits and how to increase credit card limits.

Must read: A Guide to Corporate Travel Management

What is the corporate credit card limit?

A corporate credit card limit is issued by the financial institution that provides the corporate credit card to the company. This financial institution can be a bank, credit card company, or other financial services provider.

The credit limit on a corporate credit card is determined by the card issuer based on various factors, such as the creditworthiness of the company, its financial history, and the spending needs of the company.

It is important for employees to be aware of their corporate credit card limit and to use the card responsibly, keeping within the set limit and following the company’s policies and procedures for expenses and reimbursements.

How do corporate credit card limits work?

Corporate credit card limits are typically set by the credit card issuer in consultation with the company that is applying for the card. The issuer will consider the creditworthiness of the company, its financial history, and other factors before determining the credit limit.

The company’s management may also sets internal credit limits for individual employees or departments to help control spending and prevent overspending. This can be done by specifying a maximum spending limit for each cardholder or by requiring that all expenses above a certain threshold be approved by a supervisor or manager before they can be charged to the card.

Ultimately, the goal of setting corporate credit card limits is to ensure that employees have the necessary resources to perform their jobs while also ensuring that the company is not exposed to excessive financial risk.

Factors credit card providers consider

A company’s credit report and score are two factors considered by lenders when deciding the credit limit: 

1. Credit report:

A credit report provides more detailed information than your credit card statement. It is issued by the credit bureau and contains a comprehensive record of your credit card usage, including credit utilization and payment history. A credit bureau is an agency that collects a company’s financial details and spending habits. This report helps the lender stay informed about your credit score, borrowing, and paying habits. 

2. Credit score:

A credit score is a number between 300 – 900, and it tells the lenders whether or not you can pay bills on time. A higher credit score is good for your company and can be maintained by making regular credit card payments.

Suggested read: Impact of Company Credit Cards on Credit Scores

How to increase the corporate credit card limit?

Companies can request increasing the credit limit by using the credit optimally for a period and maintaining the credit utilization ratio.

Business credit card limit enhancement could be possible if you follow these steps:

1. Visit the customer service section on your credit card issuer’s website. 
2. Click on self-service. You could also check out the FAQs on the bank website, as there are high chances they have detailed the customized process. If you don’t find a relevant FAQ, follow the next steps.
3. In the self-service section of the customer service page, you’ll find a Credit or Charge Account menu. In some cases, you’ll find an application form. From the dropdown, choose the option to request a credit limit increase. 
4. Then enter the gross annual revenue of your company and other asset information.
5. Once you fill in other relevant information, submit the request. 

You should also be able to file the credit card limit enhancement request using the customer support section of your lender’s mobile app. Please note that these are generic steps and that the actual process can differ from lender to lender. Contact the corporate customer service of your lender for more details. That said, there are some key factors that lenders consider when you ask for an increase in credit limit. 

Tips to increase the corporate credit card limit

One can follow these tips to increase the credit card limit: 

1. Boost your credit score:

Since we know the lender will look at your credit scores before increasing the credit limit, it makes sense to boost it. If your credit score is meager, the chances of getting lenders to increase the credit limit will drop.

Paying the credit card bills on time tells the lender that you’re serious about doing business and managing finances. Review your credit history for all, not just business cards. Sometimes, even personal credit card history is considered before your request is approved. 

2. Check your credit report:

Your credit report tells the lender about the terms of repayment, terms of debt financing, and such. So, get the report from credit bureaus every six months and see if there’s any room for improvement. If the report is inaccurate or outdated, get the information updated. 

3. Maintain a strong relationship:

Your bankers and fintech companies can understand your business needs and work with you to help you achieve your business goals. So, even if the business has been rocky and you couldn’t pay off the balance on your business credit card, if your relationship with them has been good, your lenders may look beyond it. Instead, they could consider the bill payment history of other business loans and lines of credit. 

4. Check your income and update information

Before you request an increased credit limit on your business rewards credit card, ensure you have the income to pay for it. More often than not, your lender will look at your business cash flows to determine whether or not you’ll be able to repay. For this, keep your financial statements updated. Statements like cash flow statement, income statement, and balance sheet reassure lenders that you’ll be able to repay the loan. 

5. Get the timing right

For example, you might not want to ask the lender to increase the limit within a year of getting the card. Spending at least one year with them gives them enough time to assess your ability to pay back. Also, avoid making a request when you’ve just closed a credit line, as that results in a temporary drop in your credit score. However, it doesn’t hurt to ask the lender to reconsider in such cases.

Future read: 5 Best Corporate Credit Cards in India

Pros and cons of increasing the corporate credit card limit

If your business is expanding and the available credit limit no longer favors you, it’s prudent to request your lender to increase the credit card limit. However, before we go through the process of increasing the credit card limit, let’s understand the pros of doing so: 

• Increasing corporate credit card limits gives you access to more capital. It can help your business make some big emergency purchases as well. 
• Plus, increasing the credit card limit will increase your credit score and decrease your credit utilization ratio. A low value of credit utilization ratio shows to the credit bureaus that you’re managing your credit responsibly.  
• A higher corporate credit card limit could increase the reward points, cash back, and other perks you receive since you’ll be making more transactions than you otherwise would. 
• Higher limits could reduce out-of-pocket expenses and reimbursements.

However, increasing the corporate credit card limit has some cons as well, such as: 

• You can make more expensive purchases, which increases your debt.
• If the loan amount is increasing, so could the interest rate. And if you carry over some debt to the next cycle, that interest would keep piling up. 

Quick read: Top 10 Corporate Credit Card Benefits

How expense management software enhances your credit card limit?

Expense management software is used for expense reporting – tracking and controlling organizational expenses. It provides features to record, categorize, approve, and pay expenses incurred by employees for business purposes. It can also help companies enforce compliance with their expense policies and generate reports for better financial decision-making.

Expense management software does not directly increase your credit card limit. However, providing better visibility and control over your expenses can potentially improve your credit score, which can impact your credit limit. A good credit score demonstrates to lenders that you are financially responsible and capable of paying off your debts, making you a lower-risk candidate for a higher credit limit.

Must read: 10 Best expense management software

What is an EPIC Corporate Card?

EPIC is a hassle-free corporate credit card issued by Happay for growth-age startups and enterprises. It gives the founders access to corporate cards with enterprise-grade controls to monitor spending. In addition, the credit is offered at zero collateral and no personal liability to the business owners. Unlike regular credit cards, EPIC corporate cards allow you to monitor expenses in real time. 

How can you raise the credit limit on your EPIC Corporate Credit Card? 

If it has been at least six months since you signed up for an EPIC card, you can request an increase in the limit. You need to meet the utilization threshold — a general rule of thumb is to keep it below 30% of your credit limit. For more information, you can write to epic@happay.in.

Conclusion 

The corporate credit card limit is crucial for businesses and is decided based on factors like credit history and cash flow. Understanding how it works helps companies make the most of their credit card facilities. Increasing the corporate credit card limit has several benefits, including access to more capital and increased credit score. However, it also has cons like increased interest rates.

The EPIC corporate credit card offers a comprehensive solution for businesses looking to expand their credit card limit. With a seamless application process and no collateral requirements, it is a hassle-free option. Furthermore, the real-time data it provides empowers businesses to make informed financial decisions, giving them peace of mind and helping them stay on budget. 

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