How To Use a Virtual Card—Setup, Payment Process, and Card Management

Jocelyn Hu, Marketing
Jun 21, 2023
 • 
10
 Min Read

The use of virtual cards as a payment method has risen in the past few years. According to a study conducted by Juniper Research, the volume of virtual card transactions rose to 28 billion globally in 2022. This figure is expected to grow roughly 340% and exceed 121 billion by 2027.

Despite the growth potential of the virtual card landscape, many users still don’t know how to use a virtual card. 

Luckily, using virtual cards is incredibly easy once you understand their core technology and features. This informative guide covers the essential aspects of virtual cards, such as:

  • What is a virtual debit or credit card?
  • How are virtual card payments processed?
  • How do you use a virtual card for online and in-store transactions?

Virtual Cards—Understanding the Basics

Virtual cards are unique card numbers that can be generated instantly and used to make purchases online or over the phone. Think of a virtual card as a normal credit card or debit card, but without the physical card.

A virtual card is typically linked to your bank account or existing debit or credit card but functions as an independent payment card. It is a randomly generated 16-digit card number with its own expiration date and CVV code, enabling you to complete transactions without revealing your actual bank or card information to the merchant. 

Depending on the funding source connected to it, a virtual card can be:

  1. Virtual credit card or VCC
  2. Virtual debit card
  3. Virtual prepaid card
An unrecognizable person browsing a food-related website on a laptop placed on a white table

Source: Surface

Why Use Virtual Cards?

The main purpose of a virtual card is to mask your real card or account information when you’re making payments. If payment card details are exposed because of a breach on a merchant’s website, you might become a victim of cyber fraud and identity theft.

Data breaches have become increasingly frequent in the past decade, with several prominent retailers (like Chipotle and T-Mobile) having reported such attacks. The average estimated cost of a data breach is expected to hit $5 million in 2023.

If a hacker breaches a merchant where you shop online, using virtual cards ensures that the malicious actor cannot access your real financial data. The advantage of using virtual cards is only amplified by the additional control and management features that many virtual card providers offer.

What Are the Common Features of Virtual Cards?

Besides enhanced security, some of the most distinguishing features of virtual cards are:

Instant Card Pausing or Closing

You can typically close virtual cards instantly without affecting your real account information. On the other hand, canceling a credit or debit card is complicated and time-consuming as it entails making an official request to your provider and submitting documentation to get a new card, which can take days to receive. You would also need to update your new card information with every vendor that keeps your billing information on file.

Transaction- or Merchant-Specific Controls

You can set your virtual cards to close automatically after a single transaction or lock it to one specific merchant, which protects the card number from potential misuse. If your virtual card becomes compromised in case of a breach on the merchant website, the hacker won’t be able to use the card at another merchant, or at all.

Budgeting Options

Most virtual card services enable customizations like spending limits. This feature offers you a more streamlined way to track and manage your personal and business expenses.

Keep in mind that not every virtual card provider has an extensive selection of features. Some providers have a limited set of functionalities or require that you have an existing account with a specific bank or credit card issuer. Others, like Privacy, offer a wide selection of virtual card capabilities and work with multiple financial institutions.

Are There Limitations to Using Virtual Cards?

Virtual cards may be unsuitable for reservations that require you to show a physical credit or debit card at the time of verification.

A good example of this situation is a concert hall requesting to see the physical payment card from the customer who used it to reserve tickets online. Similarly, some hotel reservation and car rental companies also ask to see a plastic card when the customer arrives. If you have doubts about a vendor’s reconciliation policies, it’s best to check booking rules and service terms before making a reservation.

A close-up shot of a person holding a Mastercard with a colorful, striped pattern over the laptop keyboard

Source: Paul Felberbauer

What Is the Technology Behind Virtual Card Payments?

Virtual card providers use different methods to hide your banking information from merchants. Card companies like Privacy offer a straightforward card-masking service where the vendor never interacts with your bank directly. Here’s a summary of how it works:

  1. You generate a Privacy virtual card and initiate a purchase using the card’s unique credentials
  2. Privacy pays the merchant on your behalf and completes the transaction in real-time
  3. Privacy simultaneously debits your bank account to fund the purchase

Since Privacy pays the vendor, there is no direct connection between your actual bank information and the merchant's systems. The virtual card acts as a layer of protection between your actual account information and the merchant, providing an extra level of security.

Whatever technology a virtual card provider uses, the end goal is the same—to minimize your Personal Identifiable Information (PII) shared during payment processing or stored on the merchant website.

How To Pay With a Virtual Card

Source: Nataliya Vaitkevich

Paying with virtual cards is similar to using conventional credit or debit cards. Let’s dive into details about:

  1. Using a virtual card online
  2. Using a virtual card at physical locations

Using a Virtual Card Online

Here are the steps you may need to follow to make a virtual card payment:

  1. Choose the debit/credit card option at checkout
  2. Open your virtual card app or account to generate a new virtual card or use an existing one
  3. Input the virtual card credentials in the relevant fields on the merchant’s website
  4. Make the payment

The payment process for virtual cards can sometimes involve toggling between tabs to input card details and managing a portfolio of virtual cards if you use a new virtual card for every transaction or retailer.

Luckily, many consumer-focused virtual card providers have built features that allow for a seamless online checkout experience. Privacy, a BBB®-accredited virtual card provider, has specifically designed browser extensions for Google Chrome and Firefox that make the online checkout process quick and easy. The browser extension auto-fills the credentials of virtual cards into relevant fields, preventing you from having to search for your wallet or memorize card numbers.

Set up a Privacy account and install the browser extension.

Using a Virtual Card at Physical Locations

You can use some virtual cards at physical stores that accept digital wallet payments using near-field communication (NFC) technology. Keep in mind that the virtual card must first be added to a digital wallet that enables NFC transfers, like Apple Pay or Google Pay. Once you load your virtual card to the app, place your smartphone over the merchant’s terminal to complete the transaction. 

Here’s how to add virtual cards to mobile wallets:

  1. Open your wallet app
  2. Find the add/load card option
  3. Fill in the virtual card details

Source: Jack Sparrow

Using a virtual card at a physical store is a more secure option than using your real card. Swiping your credit card or debit card at a suspicious point-of-sale terminal can be risky due to the rising instances of card skimming fraud.

How To Create Virtual Cards Online

Creating virtual cards online is easy, but the process of requesting cards and the available customizations depends on the type of service you pick. You can choose between the following providers:

  1. Banks or financial institutions
  2. Independent virtual card providers

Banks or Financial Institutions

Large institutions like American Express®, Citi®, and Capital One® offer you the option to create virtual cards, but you must have a checking account or a credit line with the provider in order to use their virtual cards.

Many banks and larger financial institutions offer free virtual card services to their customers with eligible cards. Most banks provide one virtual card against an existing card, but some banks may offer greater flexibility. You can typically request the card through an online form after logging in to your account. In most cases, banks will generate the virtual card instantly, although some institutions may take up to a day to review the request.

Independent Virtual Card Providers

Independent virtual card services have customized their services based on consumer requirements and are bank agnostic, meaning you do not need to be tied to a specific bank to use their virtual cards. They typically offer advanced security, increased spending control, comprehensive customization options, and ease of use.

You have to sign up for the independent virtual card service to get started. The setup process includes linking your debit card, bank account, or credit line to the virtual card provider. Once the linking is successful, you can typically instantly generate virtual cards.

As opposed to most banks, independent providers generally allow you to generate, customize, and manage multiple cards, as well as provide more value-added features focused on your needs.

Enjoy Fast, Seamless Payments With Privacy Virtual Cards

Privacy is a leading virtual card provider featured in Forbes’ list of the best consumer-centric companies in 2022.

Privacy's card management and customization features give you greater control over your payments. Some of the benefits of Privacy are outlined in the table below:

Features Details
Single-Use Cards
If you’re not sure about the credibility of a merchant or want increased protection against identity theft, create Single-Use Cards. They automatically close after the first transaction, so a potential hacker won’t be able to misuse the card numbers.
Merchant-Locked Cards In case you shop regularly at a specific online merchant, you’ll like the convenience of Merchant-Locked Cards. These cards only work at one merchant and can be used for multiple transactions. In the case of a data breach, a hacker won’t be able to use the card elsewhere. With Merchant-Locked Cards, you can also easily manage your subscriptions and recurring transactions.
Option to pause or close the card in one click You can pause Privacy Cards temporarily or close them at your discretion without affecting your real bank account or debit card. This feature can be useful if you want to proactively close a card that you fear may have been compromised or block charges on an unwanted subscription. Note that you still have to reach out to the merchant to have the subscription canceled.
Customizable transaction limits
Privacy Virtual Cards can be set with spending limits. This feature allows you to control your recurring transactions and prevent hidden fees. You can also share a secure card with a family member without any risk of overspending.

Privacy enables its app users to monitor virtual card transactions in real time. Privacy iOS or Android apps allow users to:

  • Create and manage cards anytime, anywhere
  • Access a unified dashboard to track spending
  • Receive notifications every time a Privacy Card is used or declined 

How To Sign Up for a Virtual Card Account With Privacy

To open a Privacy account, you must be over the age of 18 and hold a valid U.S. bank account or debit card. The platform does not conduct credit checks for a virtual card. Here’s how to get started:

  1. Go to Privacy’s signup page
  2. Add the required KYC details
  3. Link your bank account or debit card
  4. Request your first Privacy Virtual Card

Privacy Cards have the Mastercard® or Visa® brand and can be used everywhere virtual Visa and Mastercard cards are accepted. Each time you make a transaction, the funds are debited from your connected source.

Privacy complies with PCI guidelines to protect sensitive consumer data by keeping up with the required technical and operational standards of service. Users’ transactions are approved or denied based on the limits they’ve set for their cards. Privacy also offers a free 1Password integration to help you create and manage passwords and financial information securely.

Privacy currently offers a Personal plan that allows you to create 12 new virtual cards every month that are free to use for domestic transactions. The Pro ($10/month) and Premium ($25/month) plans provide added benefits like cashback and waived foreign transaction fees.

Sign up for Privacy Virtual Cards and explore the benefits firsthand!

Virtual Cards—Common FAQs

Below are the answers to some common queries users have about virtual cards.

How Are Virtual Cards Different From Digital Debit and Credit Cards?

Digital debit and credit cards are often confused with virtual cards, but there are nuances to the two unique types of payment methods.

A digital payment card is a digital representation of an actual debit/credit card that is encrypted and stored in your account or payment app. Essentially, the same card exists in both physical and digital forms.

A close-up shot of a female cashier holding a card reader and accepting a Visa card from a customer

Source: energepic.com

A virtual card refers to a payment card that has no physical existence. It may be linked to an actual credit or debit card but will have separate credentials. Compared to digital cards, virtual cards may offer greater customization options, such as:

  • Linking the card to a specific merchant
  • Closing the card after one or more transactions

How Are Virtual Cards Different From Digital Wallets?

A virtual card is typically tied to a single funding source. Digital wallets allow you to fund transactions through various payment methods, including a debit card, credit card, bank account, or virtual card, aggregated in one app.

Keep in mind that digital wallets may leave your real card data more vulnerable to cyberattacks, such as input capture attacks and PII harvesting. Virtual cards can help minimize the risk of data exposure.

Can Virtual Cards Be Used Internationally?

Depending on the virtual card provider, you may be able to use your virtual card internationally. Some issuers limit the use of their cards to one or more countries, while others may allow global use. Privacy Cards, for instance, can be used abroad with any merchant that accepts U.S. debit or credit cards though additional fees may apply.

It’s smart to check if a particular merchant accepts virtual cards, as certain vendors abroad may stick to accepting physical cards only. Currency compatibility may also be another aspect you should consider beforehand.

Privacy — Seamless & Secure Online Card Payments
Checkout securely online by creating unique virtual card numbers for every purchase. Avoid data breaches, unwanted charges, and stolen credit card numbers.
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