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Virtual Cards vs. Credit Cards: Which One Should You Choose?

Jocelyn Hu, Marketing
Jan 28, 2020
 Min Read

For most people, virtual cards are a new concept. Consequently, many consumers aren't aware of the differences between virtual cards and credit cards. Some people don't even know what a virtual card is and how it functions (we wrote something about that here, in case you missed it), but the good news is that virtual cards are quite simple to breakdown and understand.

What is a virtual card?

A virtual card is a credit or debit card that isn't a physical piece of plastic. Virtual cards are a broad category, which means virtual debit cards and virtual credit cards are both subcategories of it.

A crucial insight to consider, however, is that while virtual cards have some of the same functions as physical cards, virtual cards only exist online. Unlike regular debit cards and credit cards that consumers can use anywhere, virtual cards are great for online purchases — and they also offer benefits that a physical and virtual credit card can't provide.

What are the drawbacks of credit cards versus virtual cards?

Credit cards — regardless of the form they come in — allow consumers to borrow money from a bank. As long as the money is paid back within a specified timeframe, there are usually no extra charges that consumers have to encounter. But that doesn't mean credit cards don't come with several fees attached to them. Annual fees, cash advance fees, and late payment fees, among others, are all aspects of credit cards. If consumers are not paying attention, they might find themselves knee-deep in expenses they never anticipated.

Even worse is that credit cards allow consumers to become lenient with their buying habits, which encourages overspending. When consumers have a credit card, they usually buy items they can't afford, which leads to hefty interest fees if they can't make payments on time. Think about it — have you ever spent more money than you could and had to deal with interest fees later on? If so, you know this situation isn't fun, which is why virtual cards come in handy.

Virtual cards offer a welcome solution for consumers who want to decrease their spending and control their finances.

What virtual cards have to offer

From decreasing spending to giving consumers complete control over their card's activity, virtual cards provide several advantages that physical and virtual credit cards can't offer.

1. Consumers can close their virtual card at any time without negatively impacting their credit score

Regular virtual cards do not affect consumers' credit scores, so closing one won't ding a consumers' score.

Credit cards, whether they’re virtual or not, are a completely different beast if consumers want to close them. In fact, experts typically advise consumers to leave their credit cards open and not to use them because closing one can impact consumers' credit score, especially if they cancel the card incorrectly.

When someone opens a credit card, the best thing to do is to keep it active. But of course, there's a catch attached to this suggestion. If a credit card is left open and a consumer has a good repayment history, the transactions associated with the credit card will stay on the consumer’s credit report to showcase that they're reliable. However, if a consumer regularly misses payments, those failures can stay on their credit report for up to seven years.

Normal virtual cards don't offer this headache. By having nothing to do with credit scores, virtual cards are a safe bet regardless of whether a consumer keeps or closes one.

2. Consumers will spend less time closing their virtual card and can pause it if necessary

Closing a virtual card is very simple. It does not require consumers to call or speak to anyone, nor do they have to wait in line at the bank. All consumers have to do is log into their account and close the card. Easy.

Closing a physical or virtual credit card, on the other hand, is a lengthy process that requires multiple steps. If consumers really want to close a credit card, they have to call the credit card issuer to cancel the card, mail a certified letter to the issuer to cancel the account, ask for a letter to confirm the balance owed is $0, then check their three credit reports a month later to confirm the card was closed. For busy consumers, this is an unnecessary hassle. If you’ve ever had to do this, was it a fun and stress-free experience? We wouldn’t be surprised if your answer was no.

Virtual cards allow people to close a card in little to no time — and consumers can also decide to pause a virtual card until they're ready to use it. With Privacy, for example, individuals have the option to pause a card at any time instead of closing it outright, which would render the card permanently unusable. This feature gives consumers more control, as they can pause and reopen their virtual cards according to their budget. If consumers know they won't make a purchase for a few days, they can pause their virtual card until they are ready to use it again.

3. Virtual cards provide a safer shopping experience for consumers

Shopping online can lead to a lot of apprehension and anxiety, especially when it comes time to checkout. With hackers and data breaches so commonplace these days, it can be a scary thing for consumers to put their private credit card details online.

For Privacy customers, that anxiety and apprehension is significantly reduced. Privacy's virtual cards have little risk involved because they provide unique card numbers for each purchase, eliminating the chance for cybercriminals to steal data for fraudulent activity.

4. Virtual cards help democratize e-commerce

Smaller merchants don't typically have the same resources to ensure that consumers' information is safe. This vulnerability entices online shoppers to abandon their carts in favor of larger merchants who have more tools in place to protect their data.

However, virtual cards provide an opportunity to level the playing field between e-commerce giants and smaller businesses who are trying to succeed online. With a virtual card, consumers don't have to fumble around with their credit card and enter their personal information. By putting in a virtual card's unique card number, consumers will have more confidence in shopping with smaller retailers, benefiting both consumers and merchants.

A safe, budget-saving alternative to traditional cards

While not well-known yet, virtual cards provide many benefits that physical and virtual credit cards don't. They help consumers stick to their budgets, decrease their debt, and protect their data, all of which are things consumers seek. Virtual cards meet consumer needs while also being convenient and easy to control, and those are a few things that credit cards are simply unable to provide.

What are some ways that virtual cards have helped you save money? Share your thoughts via Twitter (@PrivacyHQ) and start using Privacy today.

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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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.
Sign Up
Privacy virtual cards
Spending Limits

Set a spending limit, and Privacy will block all charges that go over the limit

Merchant-Locked Cards

Lock your Privacy card to one merchant you frequently shop from

Single-Use Cards

Secure your one-time payments to websites whose trust worthiness you're unsure of

Pause/Close Cards

By pausing or closing a card, Privacy will block all future transactions

Get a Privacy Card Now
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.
Sign Up
Privacy — Seamless & Secure Online Card Payments
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