As convenient digital amenities like food delivery services and Amazon Prime increase in popularity, many of us are spending more money online than we do in physical stores.
This is generally seen as a good thing it makes our lives easier and even helps with tracking spending but there are some obvious drawbacks.
Many people no longer bat an eyelid over entering their personal details online at the drop of the hat, even if theyre buying from a little-known e-commerce store that may not be trustworthy.
Thankfully, the need to protect consumers against fraud is recognized. Many banks and third parties are launching diverse solutions to tackle the issue, and one of the most prominent is the virtual credit card.
Yet even though virtual credit cards have been around for quite some time, few people know they exist and even less take advantage of the benefits they bring.
In This Article:
What is a virtual credit card?
A virtual credit card provides a more secure way of paying online by reducing the amount of sensitive information merchants can access when a payment is made.
Essentially, instead of having a complete card, a virtual credit card consists of the number alone, which helps to tackle fraud.
Traditionally, virtual credit cards have only been available in digital form, but some organizations now offer physical versions too.
This may sound counterintuitive, but the physical cards still only contain a number and work for one transaction alone.
How Does a Virtual Credit Card Work?
A virtual credit card is able to reduce fraud because of the way it shares your card data. As mentioned, the card only contains a number that means no security code and no expiration data and the number changes each time.
For security, most standard physical debit or credit cards now contain an EMV chip, which creates a unique transaction code for each purchase. This was done to make it harder to capture sensitive information.
Virtual credit cards work very similarly as they also create a token with each purchase, but they have the added feature of only containing dynamic information.
This not only makes it more difficult for hackers or fraudsters to get hold of your data in the first, but it also prevents them from being able to do anything with the information they find.
Typically, finding out the expiration date, security code, and card number of somebody means you can use their details for online transactions, which makes online shopping a risky business.
Even if the merchant themselves doesnt take their data, they could get hacked by a third party. Using a virtual credit card means the number found will be meaningless.
Many virtual credit cards also come with extra features. Most companies offer a spending cap, which restricts the maximum total value of any transaction and therefore limits the damage of potential fraud. Other common features are a valid through date to stop the card being used after a certain point and the option to automate bill payments.
Most of the time, virtual credit cards are linked to normal credit cards or bank accounts, so transactions will appear on your normal statement. This also means any benefits youre your standard card, like cash back or rewards, should still work when you use your virtual cards.
Refunds work the same as normal for the same reason the money should be returned straight to your normal card in theory, although the process can be more complicated.
How To Get a Virtual Credit Card
There are two main ways to obtain a virtual credit card: through a bank youre already a customer at or through a third-party provider. The best options for both these categories are listed in the next section.
If youre already a customer at a bank that happens to offer virtual credit cards, the process is extremely simple since you already have an account with them. Most banks wont make you fill out a lengthy application, wait a long time or even undergo a credit check youll just have to register for the service online and go through some security checks.
On the other hand, if you need to use a third-party provider, the process is slightly more complicated. Youll need to sign up for the service and connect a source of funding, like a bank account or debit card. However, the application process is still fairly quick and easy.
Which Banks Offer Virtual Credit Cards?
Its certainly in the interests of banks to offer virtual credit cards they lose huge sums of money on security and refunding customers who were victims of fraud.
Unfortunately, virtual credit cards havent proven to be particularly popular amongst consumers, and a few of the major providers no longer exist: Bank of Americas ShopSafe and PayPals Virtual Debit Card are two prominent examples.
This means its unlikely your bank will offer a virtual credit card service and youre likely to need to opt for a third party instead. However, its always worth checking.
Capital One: ENO
Available to customers of Capital One personal cards, Eno is a virtual assistant installed as a browser extension for Chrome, Firefox, or Microsoft Edge.
When youre ready to buy something, just click on the browser extension button and a pop-up window will emerge showing your virtual account number. Once youve signed in, Eno creates a onetime number to pay with, and the rest of your payment information will be filled in automatically.
Youll pay with your personal Capital One credit card, so charges will show on your statement as if you paid with your standard credit card. Because of the link, youll earn the same benefits and rewards youre eligible to on your normal credit card.
One useful feature is that you can set quick nicknames for each token you generate this makes it easier to know which token you used for which transaction and track your spending better. Its especially useful when you need refunds.
Theres great customer service too. You can text Eno 24/7 to check account details, pay bills, track purchases or more.
However, you cant set a spending limit the limit applied on your usual Capital One account will automatically apply.
Customers of certain Citi cards are entitled to use Virtual Account Numbers when shopping online.
Despite the slightly different name, this effectively works the same as a virtual credit card: you can generate a random card number when shopping online. All you need to do is enroll yourself and use their website to generate virtual card numbers.
If youre eligible, you need to enroll on the website, and youll be able to start taking advantage of the service. Check whether your card is eligible on the Citi website. Its available both through a web-based tool and a downloadable program.
There are a few useful features. You can put a dollar limit and expiration date on each transaction, as well as viewing individual virtual account number information or checking balances of certain accounts.
However, bear in mind that you wont be able to use a Citibank virtual credit card for subscriptions.
Third Party That Offers Virtual Credit Cards
As the name suggests, Privacy focuses on confidentiality and security features. I can be used as a smart virtual card, browser extension, or mobile app.
Its also completely free, including no fees or charges for using your card, although whilst youre on the free version you can only create up to 12 cards per month.
But youll have access to all the main features including the ability to set spending limits, create single-use cards, use the browser extension, and access data through an API. Privacy make most their money through charging merchants that process the payment, making the cost free to the user. They also have paid versions.
The premium version gives access to more features, most importantly the chance to create up to 36 cards per month. Thats more than one a day, so if youre going over you might want to check your spending habits. Youll also get 1% cashback on purchases, priority support, and the option to hide transaction info from merchants. This comes at a cost of $10 per month.
Theres also a Teams version, which is designed for businesses rather than individuals. This allows you create up to 60 cards per month, as well as receive dedicated account management and transaction limits. Privacy promise even more features to come, including multi-user support and exportation of accounts from services like Quickbooks and Xero.
Instead of making subscriptions more difficult, Privacy make the unique feature an advantage. Having a different security code for each transaction makes it easier to cancel your subscription service all it takes is one click.
Virtual Credit Card For Businesses
When it comes to the corporate world, theres even more need for a game-changer like virtual credit cards.
Many employees dont even have a company credit card and end up using a personal card instead or, if they do use a company card, risk for fraud is greater.
Card details may be shared openly within a team, and unauthorized spending can happen. Virtual credit cards for businesses solve this problem.
American Express vPayment
The American Express vPayment service is exclusively for corporate cards in the USA. As well as assigning a single-use account number to each transaction, the use of vPayment increases productivity and makes it easier to manage employees.
Its easy to control transactions by setting a maximum payment amount and date range each time. Whoever is managing the payments will enter in the expense details, and when the payment really takes place the details are compared to the pre-authorized details. As long as the two match, the payment takes place.
vPayment also doubles as a place you can manage expense, accounting, and financial systems. Managing payments in this way means each transaction can be tracked more easily and automatically, thus reducing the manual work that needs to be done. Any discrepancies can be spotted straightaway, which increases efficiency.
Spendesk is a Europe-based payment solution for businesses that offers virtual credit cards, but it has plans to expand to the US soon. Employees request authorization for a payment through the Spendesk platform and when the request is approved, they can access the token needed for a payment.
As well as the typical virtual cards, onetime physical cards can be issued to make in-store purchases possible too useful for typical costs like business dinners or errands. These cards have pre-set budgets but they can be topped up, reduced or blocked altogether.
Because all card numbers are issued for one purchase only, its impossible for employees to share details, one of the main culprits for frauds. In addition, all data is encrypted with bank-level security and the highest standards for fraud protection are upheld.
To make tracking costs and spending easier, theres a receipt management system which automatically syncs the details from each payment. This information is then taken straight into a bookkeeping system which calculates VAT and categorizes the payments.
You can also easily manage your corporate subscriptions with Spendisk you can view all subscriptions in one place, delete old employees from plans, and pause or delete them at any point.
Pros and Cons of Virtual Credit Cards
Still undecided over whether a virtual credit card is the right move for you? Lets take a look at the advantages and disadvantages.
- Extra Security: It goes without saying that the major advantage of virtual credit cards is the extra security. Using one is the closest you can get to guaranteeing your safety in the case of a data breach, and a small price to pay for your peace of mind whilst shopping.
- Extra Perks: Extra perks are the other features most virtual credit cards have. When each payment gets made with a separate card number, its much easier to stay in control of your finances. Tracking which past payments are which is simpler, and subscriptions can be canceled at the click of a button without having to navigate your way through customer services.
- Subscriptions Harder To Manage: Subscriptions may be easier to cancel, but theyre harder to manage overall. Because subscriptions are supposed to be paid regularly, it causes complexity for a card that doesnt keep the same details. Some cards have a recurring use option that lets you keep using one token until a certain date, whilst others are single-use and not suitable for subscriptions.
- Refunds Can Cause Problems: Some stores let you buy online but make you return them in store this return process usually involves inserting your card into a machine. However, thankfully many stores now let you return items by sending them in the post. If not, you may have to accept a gift card instead of the cash.
Alternatives To Virtual Credit Cards
If you like the idea of a virtual credit card in principle but feel its too much of an inconvenience for now, there are some steps you can take to keep your data protected.
Using a VPN adds an extra level of protection against hackers to protect your personal details, a must-have for online shopping
There are also services that let you make purchases without entering your card details once youve signed up Visa Checkout, Masterpass and Amex Express.
There are also a few options that are similar to virtual credit cards but slightly more user-friendly.
Not to be confused with Apple Pay, the Apple Card is a new product with a focus on security and data protection.
In an effort to protect the identities of users, the Apple Card doesnt have an expiration date, CVV security code or signature at all. Instead, a unique device number is stored on the iPhone each transaction requires this number and a onetime security code generated by Touch or Face ID. Theres also the option to generate a new credit card number for a one-off transaction.
You can choose whether you use the Apple Card through Apple Pay or with a physical titanium card, but either way the payment process goes through the security protocol.
There are also some other perks, like sign-up bonuses and cashback offers, as well as the user-friendliness customers expect from Apple. Apple Card and all its features can be accessed straight from the iPhones Wallet app.
Bank of America Digital Wallets
Bank of America previously had a virtual credit card, known as Shopsafe, but theyve since retired this scheme and decided to focus on the BOA digital wallets instead.
Like Apple Card, the digital wallet lives on your phone inside the Digital Wallet app just add your Bank of America card. Theres no physical version the only way to pay is by presenting your phone the same way you do with Google Pay or Apple Pay.
However, its more secure than other payment apps because your real card number isnt stored on your device or shared to the merchants you buy from.
You can also add a Bank of America debit card to your digital wallet and use it to withdraw money from a Bank of America ATM with the contactless feature.
Which is the best virtual credit card?
If youre already a customer at a bank that offers virtual credit cards, a natural choice is to opt for that bank. If not, choose a third-party provider instead. Your ultimate choice will come down to how important certain features are, like the ability to authorize subscription payments or set your own expiration date.
Does Chase offer virtual credit cards?
J.P. Morgan Chase offers a single-use account, which effectively works in the same way as a virtual credit card. However, the account is only available for businesses.
A different account number is generated for each transaction. When a purchase is made, the number is emailed to a supplier, a supplier submits the transaction, and when the transaction is processed, the organization receives the information.
You can also establish a specific amount, merchant category code group and expiration date for the cards, as well as defining specific parameters for payments or suppliers and creating ad hoc payments.
Are virtual credit cards like payment apps?
When people hear virtual payment, they often think of payment apps like Google Pay and Apple Pay rather than the virtual credit cards discussed in this article. However, there are some key differences. Firstly, payment apps are mostly designed to be used in physical locations rather than online.
Similarly to the chip in physical credit cards, payment apps generate a onetime token to aid security. However, these apps still store your card details, so theyre not quite as secure as virtual credit cards.
Yet these apps may be the future of secure payments as token technology progresses, so its worth watching how they develop and integrate with other technology, like Apple Card with Apple Pay.
Is A Virtual Credit Card For You?
Virtual credit cards might not be a particularly popular or well-known way to pay, but they should be a welcome addition to the wallet of anyone who cares about the safety of their money and their personal details.
Yes, it might be slightly inconvenient to generate new payment details and enter them in each time instead of taking advantage of your browsers autofill feature but thats a small price to pay when it comes to your most sensitive data. When its free and easy to start protecting yourself, why would you run the risk of fraud?
The post What Is A Virtual Credit Card and How Does It Work? appeared first on Millennial Money.