What Is a Virtual Credit Card? Fundamentals, Uses, and Benefits
Virtual credit cards have gained significant traction recently because they are convenient and provide additional security and privacy to cardholders.
With the cost of identity thefts rising to $10.2 billion in 2022, people are trying to find new ways of shielding their personal and financial information. The question is—how does a virtual credit card increase security compared to traditional credit cards?
This article will provide clarity on the subject by answering the following questions:
- What is a virtual credit card, and how does it work?
- What are the benefits and limitations of this financial product?
- Which virtual card should you get to protect your private information?
How Do Virtual Credit Cards Work?
A virtual credit card (VCC) is a unique 16-digit number that is associated with your bank account. Think of it as a regular credit card, but without the physical format. You can use it to shop online without exposing your actual credit card information to the merchant.
If the feature is available, you can request a virtual card from your credit card issuer. The company will assign a randomly generated card number, expiration date, and a security code tied to your existing account. You can make online payments by entering the VCC number instead of your real credit card information, and the transaction will show up on your bank statement as if you used your actual credit card for the purchase.
This payment method is primarily designed to mask your real credit card details and help protect you from data breaches. The virtual card number you enter at online checkout appears to the merchant as a regular credit card number but keeps your account information safe. In case of a cyberattack, the hacker will only have access to your virtual card number, not your actual banking information.
Some credit card issuers offer virtual card numbers tied to a specific store, i.e., a particular merchant’s website. This provides additional security because, in the case of a breach, the cybercriminal won’t be able to use your virtual card number for purchases elsewhere. Even though virtual credit cards are typically single-use tokens (a different card number is created for each purchase), some institutions provide multi-use virtual credit cards.
What Is a Digital Card, and How Does It Differ From a Virtual Credit Card?
A virtual credit card is often considered the same as a digital card, but they are two different financial products. Check out their main differences below:
Digital Credit Card
This card is an online version of your existing physical card, meaning they share the same number
Virtual Credit Card
A virtual credit card is a stand-in for your physical card and is associated with your account the same way a digital card is, but their numbers differ. The virtual credit card number is a unique randomly assigned 16-digit number that comes with its own CVV code and an expiration date and is essentially a temporary card number designed to protect your online and over-the-phone payments. Virtual cards give you the option to generate different numbers per transaction or merchant, depending on the customization options
Why Should You Use a Virtual Credit Card?
Credit card misuse has marked a significant spike as of 2020, with almost 390,000 people becoming victims of credit card fraud that resulted in fraudsters using stolen credit card information to open new accounts. While the primary purpose of a virtual credit card is to shield your account information from prying eyes and potential misuse, it has many other advantages, such as:
- Increased control over transactions
- Identity theft protection
In What Ways Do Virtual Credit Cards Provide Greater Control Over Transactions?
Virtual credit cards are highly customizable, allowing you to control the usage and duration of your card.
You can typically set a spending limit and the period during which the funds can be used. This is especially useful if you want to use the card to pay for a recurring subscription. For example, if your streaming service costs $10 a month and you set a $10 spending limit on your virtual credit card, any attempt by the merchant to sneak in an additional fee or overcharge the transaction will be immediately declined.
Some virtual card issuers also allow you to:
- Create unique card numbers for different stores—A virtual card number bound to a specific store can be used as many times as you want with the same merchant. Since it is locked to that particular vendor, any attempt to use it elsewhere will be declined. You can use this option for any type of recurring transactions (such as monthly subscriptions), merchants you shop at frequently, or backend orders
- Generate a new instant card number for every purchase—This option is convenient if you don’t plan to make recurring purchases with a specific vendor or are shopping on a sketchy website. Since virtual credit card numbers are created almost immediately upon request, you can generate a new card number practically any time you want to make a spontaneous purchase
- Pause or close a card number in your virtual card account—You can typically pause or close a virtual card number with a single click without the action affecting your real bank account or credit card
The last option is useful if you want to cancel a subscription—by pausing or closing a card number, you are typically able to effectively prevent the subscription service from charging you until the cancellation is processed.
How Does a Virtual Credit Card Protect Your Identity?
Retailer data breaches have become quite common, marking the third highest rate of all data breaches from 2019 to the second quarter of 2022, according to a study conducted by Information Commisioners’ Office (ICO). Virtual credit cards are significant because they minimize the chances of your actual banking or payment information from getting stolen. If the merchant’s server gets compromised and the hacker gains access to your virtual credit card information, you only need to cancel that particular card. Since the virtual card number masks your real bank account data, you don’t have to:
- Call the bank that issued your credit card to close the compromised account
- Wait for days for a replacement card to arrive
- Track down and update your recurring payments with merchants that had pulled from the compromised account
With the option to set an automatic closing date for your virtual credit card, it might even expire before the hacker can take advantage of it. The inability to use the card beyond the spending limit and particular online store you tied it to is another advantage of virtual cards over traditional credit cards. This is an important factor to consider, given that, according to a recent study, global loses due to credit card fraud is estimated to grow over $10 billion over the next three years.
What Makes Virtual Credit Cards Convenient?
Virtual credit cards are more convenient to use than physical cards when making payments online. At checkout, all you need to do is copy-paste the virtual card number in the designated field without having to search for your plastic credit card and typing in the details manually each time. Some services also offer tools or browser extensions that auto-fill your virtual credit card number, saving you time and effort. You can also create virtual cards on the go using a mobile app and receive notifications any time a transaction is made, enabling you to track payments in real-time.
Can You Use a Virtual Credit Card In-Store?
While virtual credit cards are primarily designed for online or over-the-phone transactions, you might be able to use some of them in physical stores. You would have to tie the card information to a digital wallet, such as PayPal, Apple Pay, or Google Pay. After that, you typically need to:
- Link your card information to an e-wallet
- Use the contactless near field communication (NFC) feature on your phone to pay at the point of sale
Some e-wallets also allow QR code payment, enabling you to scan the QR code at in-store checkout.
The bottom line is that virtual credit cards can be used for in-store purchases only if the merchant accepts them and your card issuer offers virtual credit cards that you can tie to digital wallets.
Are There Any Limitations to Using a Virtual Credit Card?
However convenient and safe virtual credit cards may be, they are not without limitations. There are specific situations where using a physical card could be more beneficial than using a virtual card, such as when you’re making a reservation. A hotel or a car rental company might ask you to confirm your account information by showing your physical credit card.
A similar issue can happen if you paid for airline tickets using your virtual credit card as the company might require the card you used for the purchase as proof of identification. If you plan to purchase your airline tickets with a virtual credit card, it's prudent to ensure your passport, photo ID, or airline tickets are enough for boarding.
In situations where you plan to make a reservation/booking or purchase with a virtual credit card and are unsure whether you’ll have to present your physical card upon arrival, it is best to call the establishment in question and confirm it’s possible to pay with a virtual card.
Besides these limitations, virtual cards are exceptional for quick and secure online shopping. While you can get virtual cards from many financial institutions, not all provide the same benefits and level of security. You can sign up for a Privacy Virtual Card to enjoy safe and seamless digital purchases.
Privacy Is Your One-Stop Solution for Safe and Effortless Online Shopping
By signing up for a Privacy Virtual Card, you will gain access to a financial product that provides an additional layer of security to your online transactions.
With Privacy, you can generate virtual cards effortlessly and use them to protect your bank account data. Our automatically generated virtual cards mask your real debit and bank account info, helping you shop privately and safely online.
You can create a Privacy Card that is tied to a specific merchant and set a spending limit on it. If a transaction goes over the spending limit, Privacy will automatically decline the purchase, preventing overcharges and giving you full control over your finances. This is extremely beneficial for canceling subscriptions—once you close or pause the card, the subscription service won’t be able to charge you since they have no access to your real account information.
Note that Privacy can only decline the charges on your card. You still need to reach out to the merchant if you would like to have the subscription canceled.
Privacy is Better Business Bureau® (BBB) accredited, so it complies with customer service standards and ethical business practices.
Advantages of Using Privacy
Check out what benefits you can enjoy with Privacy:
Sign Up for Privacy in a Few Steps
Signing up for Privacy is simple—all you have to do is:
- Create an account
- Fill out the required KYC information
- Provide a funding source
- Create your Privacy Card
Once you sign up, you can create up to 12 cards per month as part of the free base tier and enjoy all the benefits we mentioned above, including:
- Creating Single-Use and Merchant-Locked cards
- Pausing and closing the card
- Adding a spending limit
- Accessing the browser extension
If you sign up for a Pro or Teams plan, you can create up to 60 cards a month, get 1% cashback on eligible purchases (totaling up to $4,500 per month), mask the transaction details on your account, and enjoy dedicated support.