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All you need to know about Virtual Credit Cards

virtual credit card

What is a Virtual Credit card.

What is a Virtual Credit card?

A virtual credit card (VCC) is simply an online version of your credit card that can be used for online purchases. Virtual credit cards make your information more secure and reduce the likelihood of credit card fraud, but can only be used for online shopping. Here’s all you need to know about virtual credit cards.

Virtual cards were first created specifically to address the risk of fraud from online shopping. Statistics depict a rapidly increasing rate of purchases with virtual cards by the year.

 The uniqueness of VCC’s lies in their mode of utilizing and sharing card data (the details printed on your card; credit card number, security code, address, and expiration date). Unlike these physical cards which have their details unchanging, Virtual Cards do not retain the same details and differ per transaction.

Now with Virtual credit cards, online shoppers can confidently make purchases knowing that their data is secure, as one of the systems security measures is to ensure that the verification data is different for each transaction

How secure is your Virtual credit card?

As earlier stated, the risks of hackers gaining access to customer information and card details from the retail outlet (who often store customer payment information against future purchases) has now been checked with the use of Virtual Credit cards which do not make use of the actual card details but rather delegated system generated verification numbers.

Virtual cards use a technology similar to the EMV chip on most modern credit cards. Both create a new token for every purchase with the goal of restricting access and misuse of static credit card data. These tokens can only be used once so even if a hacker does get access to it afterward, it’ll be rather much useless at the time.

Virtual credit cards give individuals and businesses a more secure and personalized way to pay for things online. Virtual cards are usually prepaid; like a gift card, with a specific sum of money loaded onto it in advance.

These online cards carry the same information as a physical bank card: card number, expiration date, and CVV code. Although these data aren’t disclosed to the retailers you purchase from. They are only required to register with the Virtual Card Number issuer.

Each number generated can be set for “single-use”- for cases where customer data security is utmostly sought or “recurring use” – should the customer be a periodic subscriber (to be explained further on).

These cards can make payments with the same speed and ease of the traditional credit cards except now made much more secure and effective, in many ways soon to be discussed.

How Virtual Credit Cards Work

An operational credit card number is randomly generated with a computer algorithm, similar to how modern EMV chip cards operate for card-present purchases.

These generated, virtual credit card numbers can then be used to make online purchases (similarly to how regular credit card numbers are used). Although most virtual credit card numbers have limitations on where and when they can be used.

So rather than using your actual credit card number for online payments, virtual cards utilize similar technology to the EMV in your chip card,  creating a random number that’ll be tailor specific for that transaction that can’t be used to make purchases anywhere else.

The actual limitations set for a specific virtual credit card will depend on its type and issuer, although most providers will allow you to set individual spending limits for each virtual credit card you generate.

An exception would be the Merchant-tied virtual credit card numbers, which can often be used for more than one purchase, but they can only be used with a specific merchant. These cards have a set-in expiration date (usually 12 months), although even this is a customizable feature in which users can reset themselves for perhaps longer or even shorter periods.

Are Mobile Wallets also Virtual Credit Cards?

Mobile wallet services such as Chase Pay differ from virtual cards although they also function in proferring customer security, such that instead of offering alternative credit card numbers, mobile wallets allow you to link your credit card to specific services whilst functioning as an intermediary for payments.

Chase Pay, for instance, allows you to use any of your Chase credit cards without having to repeatedly disclose your card number to online retailers.

Although it’s the large tech companies who seem to be getting users onboard their mobile wallets like Apple Pay, Google Pay, Samsung Pay, and Microsoft Wallet. These are well utilized by merchants, retailers, and customers all over the globe.

How to use a virtual cards

To use a virtual card number, Customers can simply copy/paste in their virtual card’s information (temporary credit card number) at the “checkout” step of an online payment

Plausible Purchases and Payments with Virtual cards include:

  • Subscriptions and subscription renewals.
  • Lodging Expenses; business trips, hotel stays, train, and plane tickets.
  • Stationery expenses; office supplies and miscellaneous supplies, etc.

Virtual cards and Payment apps

Although much similar, the difference lies in their active use. Whilst Virtual cards are used just for online payments, Payment Apps can be used for both. Apps like Apple Pay and Android pay function by requesting the buyer to validate the transaction with a limited-use token, not the actual credit card number (just like with a virtual credit card).

Advantage of virtual cards over credit cards

Customer security: Every payment made online with a credit card can be considered a potential security risk. Especially if there’s no assurance that you can trust the retail website with your card details.

But according to Experian, “disposable card numbers can add an additional level of security in an age when retailer data breaches seem to be commonplace. If a hacker manages to get hold of your virtual credit card information, you can simply cancel that virtual card without needing to close your entire account and get a new one.”

Finance Monitor: Unlike credit cards, virtual cards help you keep track of purchases as well as set spending limits. Expense management is optimized since a limit can be set on the cards.

Single-use cards are highly secure since they expire the moment the payment has been made.

Recurring-use cards let you track ongoing payments, and also provide an overview of weekly, monthly, and annual spending.

Ease of access; is a major advantage of Virtual cards over physical credit cards, especially times when the physical card is out of reach or missing and you need to make an emergency purchase. With Virtual cards, you can easily make purchases right there on the go, practically anywhere… anytime.

Are Virtual Credit Cards Necessary?

From the alarming rate at which online fraud is being perpetuated, it goes without saying that necessary precautionary measures must need to be put in place.

Hence, the indispensable need for virtual cards. And now online customers can be offered a great deal of peace of mind. Although regardless, Virtual card numbers aren’t allowed that flawless themselves but rather also have their inabilities.

Take, for instance, the fact that virtual credit card numbers are only as secure as the issuing company. Especially as pertains to third-party issuers; for should their database gets hacked, your information could be at risk.

Moreover the fact that fraudsters can also create fake ‘VCC issuer’ platforms to only gain access to the card details of gullible seekers who might fall susceptible.

Moreover, certain services may experience challenges in making payments using virtual cards as such services may rather prefer the use of direct credit cards. Examples could be booking hotel reservations or car rental agencies who’d prefer to make necessary verifications at check-in before accepting.

Yet another limitation of virtual credit card numbers is seen in cases where customers wish to return a recent purchase. And considering retailers make refunds directly to the original card, this could pose much of a problem as virtual cards do not have such details.

One of the best possible remedies though could be if the client would willing to accept a Gift Card in place if the refund though of the same value (which could eventually be used for future purchases).

What to look for in a virtual card

Most Traditional banks and modern fintech companies such as Spendesk offer Virtual Cards. Hence, it is important to note the features and facilities they offer before making a choice.

A major feature to look out for is the Single-use or recurring use option.

To ensure these two options are made available before choosing a Virtual card service. The difference between the two is quite simple; Single-use cards can only be used once. Suitable for placing orders from online stores like Amazon, Alibaba, etc. But for periodic subscription payments, you’ll need the second option for ‘reoccurring use’ else you’ll need a new card every month.

How many cards do you need

Some providers only give you access to one virtual card. It’s great not to have to use your main credit or debit card to make payments, but sharing these same details out to Virtual card service providers over and over again may actually only end defeating the initial purpose.

Non the less, it is advised that you create new virtual cards for every payment you make. Thence should any be compromised (hacked), you need only cancel that one card whilst all your other payments are still safe and secured – same also for the recurring ones.

And even at instances where your card goes over your pre-set transaction limit, it will only affect that one card in question and not all the others you may have ongoing.

Getting a Virtual Credit Card Number

So far we’ve seen how these randomly generated, single-use online shopping credit card numbers greatly limit online fraudsters from accessing your real financial information and are thus a must-have, especially if you are one that makes regular online purchases.

Regardless of its seeming impeccability, they’re still somewhat of a not too popular in the consumer credit card world.  PayPal, a major payment processing service, was one of the first to introduce virtual credit cards to the market, although they eventually stopped the service.

Now just a few of the major credit card issuers offer virtual credit card number-creation facilities for online shopping. Some of whom are; Capital One, Citibank, and Bank of America.

Apart from credit card issuers, several third-party companies that have also delved into virtual credit card service, perhaps having been awakened to the facts of its growing and predicted high demand.

‘Privacy’ for instance, is a third-party Platform that offers single-use and merchant-locked virtual cards that can be used through a Google Chrome extension. Although they function more like debit cards, as they are funded directly by your bank account. There’s no service fee, Privacy just receives a portion of the interchange fee from the merchants.

Entropay is also another Money transfer provider, who offers similar services although as pre-paid cards and requests a 1% fee from you to fund your account. Although you’re allowed to create an unlimited number of virtual cards with that single account.

Where to get a virtual card

You can create a virtual credit card either through your bank or SaaS service providers.

Traditional banks:

Most banks offer virtual card services, you only need to inquire from your bank’s customer care or through their app or online services. For banks that do not offer virtual credit cards, there are third-party services that can allow users to create virtual, disposable credit cards for free (such as Entropay or Final)

Virtual card services platforms:

This is an easier process that gives customers multiple advantages. But afford you the ability to customize many features, unlike the standard credit card. For instance, you now have the liberty of setting your own “valid through” dates, spending limits and even setting automated bill payments.

Disclaimer: These reviews are from the user’s perspective and not those of any bank, credit card issuer, rental or hotel chain, and have not been reviewed or endorsed by any of these.

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