What Is a Purchasing Card?

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  • Written By: Whitney Leigh White
  • Edited By: E. E. Hubbard
  • Last Modified Date: 01 June 2020
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There are many different types of cards that businesses and corporations utilize to make company purchases. Many businesses have found that the most beneficial and cost efficient type of card to use to make purchases is a purchasing card. These types of cards are given to authorized employees who are expected to follow any rules that their employer has set into place in regards to the use of the card. Most times, purchasing cards are used as a way to make payment to a company’s suppliers. The cards are very advantageous because they can be set up with employer control limits and they can help to reduce operational costs.

When companies pay their suppliers through traditional procure-to-pay procedures, many times, the company will pay more for the process or transaction cost than the actual item or items being purchased. This is a very inefficient way to operate a business. Companies that utilize purchasing cards are able to save 55 to 80 percent in process costs, making purchasing cards a very cost-efficient way to pay for supplies.

There is a large amount of suppliers that offer discounts to companies if they use purchasing cards. This is one of the main reasons that companies use purchasing cards, as they allow them to save significant amounts of money several times throughout the period of a year. Since these cards keep track of themselves through online records, companies are able to reduce their operational costs by decreasing the amount of employees within an accounts payable department.

As companies issue purchasing cards, most will issue them with employer control limits. These limits are boundaries that employees with the cards cannot exceed. Most times, the limits will be in relation to how much an employee can charge to the card either on a daily, weekly, or monthly basis. Even though purchasing cards can be set up with employer control limits, it is always wise to have each employee’s card reviewed on a periodic basis; this helps to ensure that the cards are being used in an appropriate manner.

Purchasing cards can actually be obtained in non-plastic form, such as virtual account numbers. It depends on the needs of a business as to which type of purchasing card will be the most beneficial. Before a company begins using a purchasing card, it should make sure that its suppliers and the businesses it wishes to conduct business with accept purchasing cards as a form of payment. Most companies will accept the cards, but a business must inform its suppliers that it is switching payment methods. If a business does not inform its suppliers, most times, the suppliers will not accept a purchasing card until given authorization to do so.

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