Banking Finances

Virtual Credit Cards

How we shop has changed considerably over the past couple of decades. Internet shopping has grown exponentially, but so has the risk of card fraud and this is where virtual credit cards can help.

In most cases, when you shop online, you will need to pay for the goods or services online as well. Many services such as Paypal and Google Pay sprang up to enable customers to pay online without giving their credit card details to the retailer. They provided a payment gateway between the customer and the retailer that helped to protect the card details.

The real downside to this system is that your credit card details are still held online, but not by the retailer, and you are relying on the payment gateway to hold your details securely. If your main account details are compromised, it will mean closing the account, having a new card and card number issued, and, of course, updating those details with any suppliers that receive regular payments from the card.

So how can an online virtual credit card help?

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What is a virtual credit card?

Simply put, a virtual credit card is a link to your main credit card account that only the card issuer will know. It looks identical to your main credit card but the details, such as a virtual credit card number and the security number on the back are different. Only your card issuer has the real credit card account details that link to the virtual card.

There are a number of ways in which virtual credit cards can be issued and used.

The very simplest is a single-use credit card, which you use to buy something online and as soon as that transaction is complete the credit card is deactivated. This is the safest form of credit card because even if someone manages to capture the card details, they are useless. It is perfect for using online.

Other versions of virtual credit cards are multi-use but may have other restrictions. For example, the card may expire after a certain date, which could be useful for making a certain number of payments in a particular time-frame.

Another good example is a virtual credit card with a restricted credit limit. This could be issued to employees for example, so that purchases can only be made up to the set limit. Or perhaps the card could be limited for use with only a single retailer or merchant. It enables the main credit card account to be used by multiple people, without risking the main account details.

Using a virtual credit card online is just the same as using a normal credit card, but in a safer way and maybe with restrictions imposed as discussed above.

Virtual credit card advantages

Using virtual credit cards instead of the main account credit card gives several advantages:

  • The main advantage is that the main credit card account details are not exposed to fraudulent use
  • You can generate a new card and number for every transaction if you wish
  • The card cannot be stolen
  • Deactivating the virtual credit card is easy
  • Impose lower limits than the main account
  • Restrict the cards use to certain vendors

Virtual credit card disadvantages

As with almost everything, there may be some compromises to be made when using a virtual credit card:

  • If you need to return an item, the vendor probably cannot refund your card and you may have to accept a gift voucher or gift card instead
  • Setting up regular payments using a virtual credit card with a short expiry time could cause problems when the card expires
  • Making purchases offline is not easy with virtual cards, and many vendors won’t accept them in store
  • Verifying the card details when you collect an item bought with a virtual card can prove problematic, for example, rental cars or tickets for a stage show

That’s about all for the disadvantages, and they are not insurmountable.

FAQ

How do I get a virtual credit card?

Virtual credit cards are generally issued by the company you have a credit account with. They are linked to your main account but have different account numbers to protect your main account from fraud. Another option is a standalone virtual credit card provider, that operates as a pre-paid card that you top up from a bank account.

Are virtual cards safe?

Yes. Virtual credit cards offer some added safety features, such as short expiry dates, lower credit limits or one-time use. You should still take precautions when buying online as a virtual card cannot protect you from scammers.

Where can I use a virtual card?

Generally, virtual cards are designed for online purchases and using them offline in-store at the moment isn’t really possible. However, technology is changing constantly, and mobile apps may in the future offer the opportunity to more easily use virtual cards when shopping offline.

When should I use a virtual credit card

When shopping at well-known, reliable online stores, they are generally safe and secure, so the risk of your data being taken is minimal. When you are using a new online shopping site, the risk is much higher, and it would then be sensible to use a virtual card.

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