Lifecycle

The lifecycle of a corporate credit card is similar to a standard credit card. However, they have unique elements influenced by the partnership between the businesses and the issuing financial institution. Below are the stages:

1. Program Design
2. Program Enrollment and Card Approval
3. Card issuance and account setup
4. Transactions and Reversals
5. Corporate Credit Card Program Status
6. Credit Card Management
7. Interest, Fees, and Taxes
8. Billing and repayment
9. Delinquency management
10. Account Closure or Upgrades

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🧩 Program Design

Issuers (banks and fintech companies) design corporate credit card programs depending on the business requirements. This stage has the following activities:

1. Issuers conduct market research to identify business spending patterns to design a program.
2. Issuers define card features such as spending limits, rewards, interest rates, and fees.
3. Issuers develop risk assessment and fraud prevention strategies.
4. Issuers partner with networks (Visa, Mastercard, and Rupay) to issue credit cards.
5. Issuers create a physical or virtual card issuance process.
6. Issuers integrate reporting and analytics tools for businesses.

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📝 Program Enrollment and Card Approval

Businesses apply to enroll in a corporate credit card program to issue credit cards to their employees based on eligibility, financial needs, employee usage, and available issuer benefits. This stage has the following activities:

1. The business applies with the required documents such as KYC, financials, tax ID, and so on.
2. The issuer validates submitted documents, assesses company creditworthiness, and determines credit limits.
3. The business defines policies on who gets a card and spending categories.
4. The issuer carries out risk analysis and compliance checks.
5. The issuer sets up a corporate card dashboard for expense tracking and card management.
6. The business and the issuer sign an agreement.
7. The business is onboarded, and corporate credit card program policies are set.

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💳 Card Issuance and Account Setup

After the approval, the issuer provides cards based on the company's requirements. Here are the activities in this stage:

1. The business issues physical and virtual cards with unique identifiers and creates respective accounts.
2. The business configures spending rules such as limits, categories, and approvals.
3. The business integrates with expense management systems (SAP, QuickBooks) for card management.
4. Employees receive corporate credit cards with defined spending rules.

Credit Cards Status

A corporate credit card (physical and virtual) goes through the following states:

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System Block:

The system blocks the card if a customer makes incorrect PIN attempts, where n is the attempt limit as per the issuer's policy.

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💸 Transactions and Reversals

Corporate cards are used by employees for business-related purchases, and any incorrect or disputed transactions require reversals or refunds.

Transactions

Below is how transactions work:

Credit Card Usage

1. The employee uses the credit card for any business expenses, such as travel and accommodation.
2. The payment network, such as Visa, Mastercard, and RuPay, processes the transaction.
3. The transaction is recorded in the corporate card system, waiting for the final settlement.

Transaction Verification and Authorization

The issuer verifies the transaction against spending limits, merchant category restrictions, and fraud detection algorithms.

1. The transaction is approved if it meets the criteria and is posted to the corporate account.

Settlement

1. The business’s issuer submits the transaction to the payment network for final settlement.
2. The issuer releases the funds to the business.
3. The transaction amount is debited from the corporate credit card account.

Reversals and Refunds

Any incorrect, unauthorized, or disputed transaction requires a reversal and refund. Below are the types of reversals in a corporate credit card program:

Merchant Reversal (Refund)
This is a type of reversal when a merchant cancels or refunds a charge due to a return, service failure, or overcharge. Here is how this reversal works:

1. The merchant initiates a refund to the credit card.
2. The amount is credited back to the business’s account.

Authorization Reversal (Pending Transaction Cancellation)

This type of reversal happens when an authorized transaction is canceled before settlement. For example, a pre-booking of a hotel is canceled. Here is how this reversal works:

1. The business requests an authorization hold release before funds are settled.
2. The issuer removes the pending charge before the settlement.

Disputed Transaction Reversal (Chargeback Process)

This is a type of reversal when an employee reports a transaction as a fraud, billing error, or unauthorized. Here is how this reversal works:

1. The employee raises a dispute request using the corporate portal.
2. The issuer verifies the claim and requests documentation.
3. If the dispute is valid, the issuer initiates a reversal and credits the amount back.
4. If invalid, the charge remains, and the business is responsible for payment.

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📊 Corporate Credit Card Program Status

Every credit card is associated with an account. The credit card account goes through the following statuses:

Active

When all accounts are created against credit cards and are activated, the program status moves to the active state. This state signifies that the employee can use the card for transactions, and all associated features, such as rewards and promotional benefits, are operational.

Inactive

This state is at the credit card account level and not at the program level. For example:

• If a credit card account moves to CMS-induced NPA and gets suspended, the corporate status will also change to suspended. Similarly, if all accounts are removed from NPA, the corporate should also be removed from NPA.
• If an account becomes delinquent, the corporate status will also change to Blocked- overdue. Similarly, if all accounts are removed from delinquency, the corporate should also be removed from delinquency and should be back to active-normal.
• A program is closed only when all the associated accounts are closed. No new accounts are onboarded.
  If a program turns bank-induced NPA, all associated accounts should be blocked for further transactions. Similarly, when corporate is removed from bank-induced NPA, all associated accounts should be unblocked.

Blocked

A corporate credit card account transitions to the blocked state when the issuer or businesses temporarily or permanently restrict access to the card due to specific concerns. In this state, the cardholder cannot use the card for any transactions until it is reactivated. The account can be blocked for the following reasons:

Suspended

A corporate credit card account transitions to the suspended state if it becomes a non-performing asset (NPA).

Non-Performing Asset (NPA)

A non-performing asset (NPA) is an account in the company that has failed to make payments for an extended period, leading it to a defaulted account marked by the issuer. The following diagram depicts the tagging and detagging of NPA accounts.

Cash Management Services (CMS) Induced NPA

A CMS can induce NPA because of payment processing failures or delays within the CMS system. Some common CMS-related reasons include:

• Delayed Fund Transfers: Corporate card payments processed through CMS may get delayed due to banking cut-off times, weekends, or holidays.
• Auto-Debit Failures: The transaction fails if a company has set up auto-debit for credit card payments using CMS but has insufficient funds.
• Technical Issues: System errors in CMS may cause payments to be rejected or delayed, leading to missed due dates.
• Incorrect Payment Mapping: If a corporate account is not properly linked to the card program, payments may not reflect, leading to artificial NPAs.

Bank/Issuer Induced NPA

A bank-induced NPA occurs when an issuer’s internal processes, policies, or errors contribute to a corporate credit card account becoming overdue or classified as an NPA. Some common bank-related reasons include:

• Delayed Posting of Payments: If the bank receives a corporate payment but fails to reflect it on time, the account may be marked delinquent.
• Internal Processing Errors: Misallocation of payments or mismanagement of repayment schedules can cause an account to become overdue.
• Unapproved Payment Adjustments: In some cases, a corporate employee may dispute a charge, but the bank fails to adjust it, leading to an artificial overdue balance.
• Credit Limit Adjustments Without Notification: If a bank suddenly reduces a company’s credit limit (due to policy changes or risk assessment), existing transactions may exceed the limit, triggering penalties and a potential NPA situation.
• System Downtime or Outages: If the bank's payment systems are temporarily unavailable, businesses may fail to process payments on time, leading to overdue accounts.

Impact of NPA

• The corporate moves to NPA, and employees are not allowed to spend (online, at POS, or using contactless), as well as not are they able to advance cash via ATM.
• Accounts and corporate moves to a suspended state.

Closed

A corporate credit card account transitions to a closed state when the account is permanently deactivated and cannot be used for transactions. Additionally, A program is also closed when all the associated accounts are closed. No new accounts are onboarded.

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Watch Out!

The account cannot be reopened if it is closed.

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⚙️ Credit Card Management

Cardholders can manage their credit card through the issuer’s portal. They can perform the following actions to manage their cards:

• Set/reset credit card PIN
• Raise a card replacement or renewal request
• Convert any transaction to EMI
• Change card spending limits
• Change the due date of the repayment
• Raise a temporary credit limit change request

Card Replacement

Card renewal is the process of issuing a new card linked to the card account of the card that is about to expire. Below is how the card replacement works:

1. The issuer sends renewal alerts 30-90 days before expiry via email or SMS.
2. Most corporate cards are automatically renewed unless the company or issuer blocks them.
3. The issuer prints and personalizes the renewed cards with the same or a new design. New expiration dates and updated security features (if any) are embedded.
4. Employees activate the renewed cards via the issuer’s portal or mobile app. Once the new card is activated, the old card is deactivated automatically.

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💸 Interest, Fees, and Taxes

Corporate credit cards come with financial obligations that cardholders must understand to use the card effectively. These obligations generally include taxes, interest rates, and fees, which vary depending on the terms set by the issuing bank and the co-branding partner.

Interests

Interests are applied to each transaction from the date of the transaction. Below are the types of interest rates:

• Purchase Interest Rate: Interest rates are charged on purchases if a cardholder fails to pay the TAD before the due date. However, for cardholders who always pay the TAD, there is an interest-free credit period up to the due date.
• Cash Advance Interest Rate: Interest rates are charged on cash advances from the transaction date, irrespective of when the payment is made. Also, there is no interest-free period for cash advances. This interest rate is added to the next statement.
• Partial Payment Interest Rates: When a cardholder makes a partial payment instead of paying the full outstanding balance on their credit card, an interest rate is applied to the unpaid amount. The following example illustrates this. The 3.25% is the monthly and the daily interest depends on the number of days in the month.

Fees

Corporate credit cards come with various fees that cardholders should pay during the account lifecycle. Below are some examples of types of fees:

• Entrance fees
• Annual fees
• Add-on Card
• Service Charges on the outstanding balance
• Cash withdrawal fees
• Hotlisting fees
• Interest on Cash Advance
• EMI/BT processing fee
• EMI/BT Foreclosure fees
• Late Payment Charges (MAD)
• Over Limit Charges
• Payment Return Charges
• Card Replacement Fee
• Foreign Currency Transactions
• Rental Charges
• Fuel Surcharge
• Rewards redemption fee
• GST
• EMI interest rates

Taxes

Depending on the corporate and bank addresses, one of the following taxes is levied on all fees and interest amounts.

• CGST (9%) + SGST (9%): When the customer and bank are from the same state.
• IGST (18%): When a customer is from a different state.
• CGST (9%) + UGST (9%): When a customer and bank are from a union territory.

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🧾 Billing and Repayments

This section provides information about billing and repayments of corporate credit cards.

Billing

Billing is a structured process that involves transaction processing, statement generation, payment collection, and reconciliation. It is designed to streamline expense management for businesses. They can have different billing cycles for different cardholders, departments, or spending categories within the same corporate card program. This helps organizations streamline expense management, align payments with cash flow cycles, and improve reconciliation efficiency.

Statement Generation

• The issuer generates billing statements for the corporate account at the end of the billing cycle.
• Businesses can configure billing cycles depending on departments, regions, or individual employees.
• The generated statement includes:
  • Transaction Details (merchant, amount, date)
  • Payment Due Date
  • Applicable Fees and Interest (if any)

Billing Flexibility

• Employee Individual Statements: Each employee receives their bill, and the company either pays it centrally or asks employees to submit reimbursements.
• Consolidated Corporate Statement: A single bill is generated for all employee transactions, and the company pays it all together.

Repayment

Repayment is settling outstanding balances incurred by employees or business units using corporate credit cards. The repayment process is structured to align with the organization's cash flow, expense policies, and liability structure.

Repayment Models

Below are the different repayment models supported:

Centralized Repayment (Corporate Liability)

• The business pays the full amount for all transactions on behalf of employees.
• The issuer sends a single consolidated statement to the finance team.

Individual Repayment (Employee Liability)

• Employees are responsible for paying their own bills.
• The company reimburses the approved business expenses.

Hybrid Repayment (Shared Liability)

• The company pays for official expenses, while employees settle personal charges.
• Issuers may provide split billing options.

Supported Payment Methods

The following are the supported payment methods available.

• VISA Fast Funds
• VISA Money Transfer
• Net Banking
• Payment Gateway (Net Banking and UPI)
• NEFT
• IMPS
• RTGS
• Direct Debit (from the savings account of the same bank)
• Standing Instruction (from the savings account of the same bank)
• Demand Draft
• Cheque
• Cash
• Debit Card

Auto-Debit/Auto-Pay/Standing Instructions

Corporates will have current accounts or overdraft accounts at the bank that they can use to pay their credit card bills automatically. The auto-debit configuration, in addition to the account level, should also be at the corporate and program levels. If this is set to yes, then account-level auto debit configuration is not applicable, and should not be changed to Yes. This configuration can be updated by the corporate or by the bank staff.

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🚨 Delinquency Management

Delinquency is the status of an account when the corporate fails to make the minimum payment by the due date.

Types of Delinquency

There are two types of delinquency:

• CMS-induced delinquency
• Bank-induced delinquency

How Delinquency Works?

The delinquency is divided into cycles, which indicates the number of payments the cardholder has missed.

For example, the account moves to cycle 1 when a cardholder fails to repay MAD within the due date. Similarly, if the cardholder fails to repay MAD within the due date of the next billing cycle, the account moves to cycle 2, and so on. The days past due (DAD) are calculated from the due date.

How Repayment in Delinquency Works?

The account moves to the lower cycle if the cardholder repays the earlier MAD, not the total amount due (TAD).

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Example

If MADs for 3 months are INR 1,000, INR 3,000, and INR 10,000, respectively, and the cardholder has missed paying 2 MADs, the account will be in cycle 2. Now, if the cardholder repays INR 1000 before the due date of the 3rd month, the account will move back to cycle 1 and will:

• Move back to cycle 2 if the cardholder fails to pay INR 2,000 by the due date of the 3rd month.
• Remain in cycle 1 if any amount between INR 2,000 and INR 8,999 is paid.
• Remove from delinquency if the cardholder pays the TAD.

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🔁 Account Closure or Upgrades

The last stage of the lifecycle of a corporate credit card account is the account closure. This stage represents the point at which the account is no longer active. This stage can occur voluntarily or involuntarily and signifies the end of transactions and activity on the card. Below are some of the reasons for account closure:

• Voluntary closure
• Closed by issuer/bank