What is a Virtual Credit Card

What is a Virtual Credit Card

In the Digital Era, everything is virtual—including our credit cards. Unlike traditional “plastic,” virtual credit cards feature a number generated at random that’s then linked to your physical credit card. Different credit card companies work differently, and some allow you to set maximum charges solely for that virtual number. This cap means even more protection with every transaction. You can often set an expiration date, too.

Why do we need virtual credit cards when regular credit cards have served us pretty well? It’s those key words, “pretty well,” that can be troublesome. For the most part, when you use your credit card on big, popular, trusted sites like Amazon, Target or Macy’s, you’re pretty confident that the company isn’t going to take advantage of your financial trust. However, what about new companies? What if you want to support a startup, purchase from an independent designer’s website or are otherwise uncertain of an online merchant?

That’s when you can use a little extra peace of mind and protection that a virtual credit card can offer.

Minimizing Risks

Not only do online merchants have your credit card information, they also have your billing address, security code, and perhaps even more information (such as your birthday if you want to sign up for special birthday promotions). In most cases, online transactions require all the necessary information to put you in a vulnerable situation. Even though you’re ultimately not responsible for any unauthorized charges, it’s still a nightmare to untangle. Battling an abused credit card can leave you in a bind, unable to make other purchases.

Virtual credit cards are ideal for online shopping when you’re not 100 percent certain of the merchant. With virtual credit card numbers, you’ll see the charge on your usual credit card bill, but the merchant doesn’t have your real credit card number. They only have the randomly assigned string of numbers that often feature spending caps and earlier expiration dates.

Getting Your Virtual Credit Card

A number of companies and banks offer virtual credit cards, each with a variety of perks and options. You can check with your current credit card company or discover a new (to you) option in the fintech space. Some virtual credit cards feature applications that let you auto complete the details of your credit card, making desktop and/or mobile purchases even faster and easier without compromising security.

With a “single-use virtual credit card,” you get more control when making business payments, too. Credit cards for businesses are a very important cog in the machine, and a compromised card can cause severe disruptions to business. When single-use transactions are finished, the virtual credit card number becomes moot. This is an added security layer above and beyond “just” virtual credit card numbers because it’s a “one and done” transaction.

Businesses may also want to opt for enterprise reporting where virtual credit cards are integrated with AP/AR systems and ERP to make bookkeeping and accounting seamless. Some companies offer extra bells and whistles, such as corporate purchasing cards where you can get a card management platform right on your mobile device to oversee virtual and “regular” credit cards with a few swipes.

Tidbits to Keep in Mind

Virtual credit cards can drastically increase your security, whether you use them for personal or professional use, but do keep in mind that they’re only for online use. You can’t walk into a brick and mortar establishment and ask to use your virtual credit card number. However, you can often shop in person then make your purchase online with a virtual credit card number using your phone or tablet right in the store, or use your desktop computer at home.

Any space where you’re required to physically swipe a credit card requires your physical credit card. However, those transactions are usually smaller than online purchases. It’s online shopping, from picking out your new appliance sets to paying your monthly vendors for services rendered, where the costs really add up. In these situations, a virtual credit card gives you an added boost of buying confidence. You’re free to try out new websites and merchants without wondering if they’re legitimate or if you’ll have to cancel your physical credit card in a few weeks when fraudulent charges pop up.

Security Magazine reports that even though Americans only make up 24 percent of credit card purchases in the world, they’re victims to 47 percent of fraudulent charges. Credit card fraud is on the rise, especially in the U.S., but virtual credit cards can help you safeguard yourself, your finances, and your business.