Understanding the difference between corporate debit and credit cards

By David Beach•Published on 24 October 2023•4 minutes

Finance

Understanding the difference between corporate debit and credit cards

In this article

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International card issuers: Visa, Mastercard, American Express
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What is a debit card?
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What is a credit card?
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What are the differences between a debit card and a credit card?
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Which option is better as a corporate card?
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Airwallex Borderless Card
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Steps to applying for the Airwallex Borderless Card

When it comes to corporate expenses and employee spending, having a company card can greatly streamline day-to-day operations.

Among the various payment options available, the use of debit cards and prepaid cards has become increasingly common, with Visa and Mastercard being favoured by consumers for their global acceptance and security. Moreover, many company cards now offer cashback benefits so you can enjoy rebates on your purchases. But which option should you choose for your company? In this article, we will explore the differences between these two types of cards and highlight the respective benefits they offer as company cards.

International card issuers: Visa, Mastercard, American Express

There are six major international card issuers in the market, namely Visa, Mastercard, American Express, UnionPay, JCB, and Discovery. These card issuers typically do not directly issue credit cards (except for American Express), but rather provide payment system services and collaborate with banks and other financial institutions to launch credit cards.

In the UK, the most prevalent international credit cards are from Visa, Mastercard, and American Express. Each card issuer has its own fees (such as foreign currency transaction fees), exchange rates, and their acceptance may vary across different merchants. In general, Visa cards are more common in Europe, the United States, Australia, and Asia, while Mastercards are primarily used in Europe and North America. Meanwhile, UnionPay cards are more widely circulated in Asia.

Visa

Visa is the world’s largest card issuing organisation. They partner with approximately 15,000 financial institutions and governments to provide services in over 200 countries and regions worldwide. Visa card numbers typically begin with the digit "4".

Mastercard

Mastercard, as the second-largest card issuing organisation worldwide, operates in over 210 countries and regions. Mastercard card numbers usually begin with the digits "51" to "55", and offer different corporate cards including Standard Business, Debit Business, World Business and Business Prepaid.

American Express

American Express, while not as ubiquitous as Visa and Mastercard, is the third most recognisable international card issuing organisation in Europe. Amex claims that 88% of its cardholders prefer it as their payment method of choice, and spend 1.2x more per transaction and 3.9x more annually on average. American Express card numbers usually begin with the digits "37" or "34", and offer different business tiers including Basic, Platinum and Gold, along with partnerships with British Airways and Amazon.

What is a debit card?

A debit card is linked to the user's designated account and funds are directly deducted from the account. Generally, the debit card can only spend what is in the account unless an overdraft facility has been set up. Debit cards can be used for online and in-store purchases, and cash withdrawals as well. Visa and Mastercard debit cards are generally the same - you can use them both for direct payments for transactions or for withdrawing cash at ATMs.

What is a credit card?

A credit card is linked to a line of credit offered to the individual by the credit issuer. When used to make purchases, credit cards accrue debts which must be paid off either in full each month, or over a longer period as agreed with the credit provider, though the individual is usually charged interest. Credit cards are often used as loans, building a credit score or making use of ancillary benefits like airmiles or cashback.

What are the differences between a debit card and a credit card?

The difference between a debit and a credit card lies in the spending patterns. A credit card allows you to spend “future money". Users make purchases with a predetermined credit limit provided by the credit provider (usually a bank), and the bank settles the payment with the merchant. The user then repays the bank for the card balance at the end of the month (their future money).

On the other hand, a debit card works on the principle of "spending what you have." Transactions and withdrawals can only be completed with sufficient funds in the linked bank account. If the balance is insufficient, the transaction cannot be processed.

The benefits of debit cards

Since a debit card deducts funds from the bank account instantly during the transaction, users do not accrue any outstanding balance with the bank, hence there is zero possibility of forgetting to settle the balance and no additional interest or fees are incurred. Additionally, a debit card allows users to limit their spending within the account balance, which effectively prevents excessive spending and reduces the risk of accumulating debt.

Which option is better as a corporate card?

Of all the payment options available, the use of debit cards and prepaid cards has become increasingly prevalent.

As many small and medium-sized enterprises may not meet the operational or revenue requirements to apply for a corporate credit card, the debit card is a great option. The minimum criteria is lower, usually requiring only a functioning company account. Additionally, many debit cards now offer cashback rewards that allow customers to enjoy rebates while making purchases.

For companies that have overseas suppliers, a multi-currency corporate debit card can eliminate handling charges and currency exchange costs, as it draws the currency from the correct currency account. It allows payments in over a hundred currencies, and you can exchange foreign currency at real-time exchange rates during transactions. You can also store the foreign currency in a foreign currency account for future use, allowing you to exchange at favourable rates and effectively manage currency risks.

Furthermore, companies have the option to apply for debit cards for their employees to facilitate procurement or business trips.

When should I use a company card vs an employee card?

Company cards are good for business purchases that are typically made online and on behalf of the entire company or specific teams and departments. This could include purchases such as software subscriptions, office supplies, supplier payments, and marketing expenses. As an admin, you will be able to access card details for company cards.

Employee cards are great for individual employee purchases either made online or in person. This could include travel expenses like airfare or hotels and incidental purchases like coffee or snacks. Cardholders can also add their employee cards to their digital wallet for easy, contactless purchasing. As an admin, you will not be able to access card details for employee cards. Only the cardholder will be able to access their card details.

Airwallex Borderless Card

The Airwallex Borderless Card is an international business debit card that supports over 140 currencies, without any foreign transaction fees or hidden charges. With this card, you can directly pay from your Airwallex multi-currency account for foreign currency transactions. In case the currency balance in your account is insufficient, the card allows for foreign exchange at competitive market rates from another held currency.

Moreover, you have the option to issue multi-currency employee cards and set individual spending limits for each employee. The Airwallex Borderless Card is synchronised hourly with accounting software such as Xero, NetSuite, QuickBooks, Odoo and Sage. This integration enables real-time expense tracking, comprehensive budget management and simplified monthly reconciliation.

Virtual Visa cards reduce the risk of fraud

Airwallex offers virtual cards as well as physical cards. It takes only a couple of minutes to set up a virtual card, and you can use it instantly for online or in-store payments. Compared to physical cards, the risk of theft or loss is significantly reduced with virtual cards.

Additionally, you can monitor the expenditure details of each virtual card in real-time. If there are any large or unusual expenses, you can immediately freeze the card.

Employee Visa card enables setting spending limit for each employees

You can set different spending limits for each employee to help prevent unauthorised expenses. Limits include validity period (can be set to expire after a certain date), spending amount (daily, weekly, monthly, or yearly limits), spending frequency (single or multiple uses), approved merchants, and more.