Business expense management may seem to run smoothly on the surface. Done well, and senior leaders hardly notice the processes humming in the background. But done inefficiently, it can cost the business in excess spending and operational waste.
A key factor that affects expense management’s efficacy is whether you’re using a purchasing card or a credit card for team resource spending. Spending restrictions or interest on unpaid monthly totals can greatly affect how teams use each card.
Read on to explore purchasing cards versus credit cards and how Moss offers a third, more versatile option.
What’s a purchasing card?
A purchasing card is a type of corporate credit card often used by businesses with significant procurement needs. A company distributes purchasing cards (also called purchase cards, procurement cards, or P-cards) to employees so they can buy what they need to complete their day-to-day tasks, such as office supplies or services.
Purchasing card charges are paid by the employer at the end of the month, with no option to carry over the balance to the next. Employers can set spending limits and approve specific merchants to prevent misuse and speed up the buying process without sacrificing control and oversight.
Moss’s Corporate Cards are a great example of a corporate purchasing card. This product allows for customizable limits, vendor specifications, and virtual card creation to make online purchases easy.
What’s a business credit card?
A business credit card is used to make business purchases on credit, meaning you buy something now and pay for it later. Also known as corporate or company credit cards, business credit cards are often used for larger purchases. Management typically controls this type of card, and it has a credit limit (the maximum balance that can be accrued). At the end of the month, cardholders can either pay off the balance or carry it over, which will incur interest.
Like personal credit cards, corporate credit cards often offer rewards like travel points or cashback. But these products are harder to control, meaning they might be a less desirable option for employers to give employees.
Moss’s Corporate Cards are a business credit card example, with one twist: They combine the payment flexibility and access to funds of a business credit card with the spending controls of a purchasing card, which is a unique balance well-suited to large, global companies with complex financial operations.
P-card vs. credit card: Which should you choose?
Here are a few common use cases suited to each card type.
Use a credit card when:
Spending is infrequent or high-value
Business credit cards are useful for larger purchases — so if your company primarily makes occasional, high-value purchases, such as equipment that doesn’t need to be replaced often, a credit card is a good option.
You have a robust policy enforcement process
Because most credit cards don’t have many restrictions, you’ll need to develop a policy that clearly instructs employees on how to use them. The finance team should create procedures for handling misuse of company funds, whether done intentionally or accidentally.
You need built-in fraud protection
Credit cards come with protections against fraudulent transactions. If the finance team detects a fraudulent charge, they report it to the credit provider and, in many cases, you’ll get your funds back. For example, Moss’s Corporate Cards come with Mastercard security built-in.
Use a purchasing card when:
You have routine, low-value purchases
Purchasing cards make day-to-day expenses — such as supplies, event space, or per diem travel costs — quick and easy. If your business requires regular, smaller purchases like these, a P-card is an effective solution.
You need policy baked into the card
If your company doesn’t have a way to enforce its spending policy, built-in controls make P-cards the better choice. With Moss’s purchasing cards, for example, you can customize for various use cases and easily deactivate a card if needed.
You want real-time visibility
Purchasing cards usually allow you to view transactions in real time. You can also access more information about the merchant and spending category than a credit card statement provides. Moss offers a real-time overview of all card spend, for instance.
Purchasing card vs. credit card: Pros and cons
Let’s dive into the advantages and disadvantages of each business card option so you can select the best one for your business needs — or feel confident about going with a hybrid option like Moss’s Corporate Cards.
P-card pros
Speeds up the procurement process
Because you add spending restrictions and approved merchants, there’s no need for pre-approval, reducing administrative burdens and speeding up the time it takes to access required resources.
Embedded controls prevent unauthorised spend
Employers control how P-cards are used — limiting by amount and vendor — so only appropriate transactions go through. This means finance teams can spend fewer resources enforcing compliance.
P-card cons
Requires full balance settlement each billing cycle
The purchasing card balance must be paid each month. Depending on a business’s cashflow, this lack of flexibility could create challenges.
Automated controls may miss specific fraud schemes
While the risk of fraud is lower than for a credit card, there’s still some risk. A non-employee could get their hands on the card and make a personal purchase at an approved vendor, for instance.
Fewer issuer and program choices available
While most financial institutions offer corporate credit cards, not all offer procurement cards. As a result, businesses have fewer options to choose from.
Credit card pros
Offers rewards like cashback, travel points, and miles
Business credit cards often include rewards. As employees make purchases on the card, the company can earn cashback, travel points, or miles.
Flexible payment — balances can carry over
Companies can carry balances month-to-month, which helps break up large purchases or manage variable cashflow.
Built-in fraud liability coverage protects against unauthorised charges
Credit cards come with fraud liability coverage, meaning businesses aren’t on the hook if there’s an unauthorised charge on the card. This reduces unnecessary costs and provides peace of mind.
Credit card cons
Interest compounds on any unpaid balances
If you choose to carry a balance on the card, keep in mind that unpaid balances will accrue interest over time, which can become costly.
Unrestricted spending opens the door to misuse
When you can’t limit spending, employees could misuse the card by making personal purchases, even if done accidentally. That’s why enforcing best-use policies is crucial.
Reconciliation often requires manual expense reporting
Credit cards don’t always integrate into a company’s accounting software, and employees may need to submit purchase orders, invoices, or receipts for expense tracking and approval.
Get the best of both cards with Moss
Purchasing cards and credit cards are both for making business purchases, and neither is inherently better. They each offer benefits: With a purchasing card, you have greater control over spending; with a credit card, you can roll over your balance.
To enjoy the payment flexibility of a credit card and the customizability of a purchasing card, try Moss’s Corporate Cards. Moss automates receipt documentation, reminders, and bookkeeping so your finance team is always on top of spending. Plus, Moss cards have Mastercard security policies built in.
Spend smarter — try Moss today.
