What is a Virtual Credit Card? Features, Benefits, and Limitations (2024)

Key Takeaways

With over 2.64 billion online shoppers worldwide, it’s not surprising that digital payment methods are also transforming to provide greater convenience and security.

While credit cards are one of the safest ways to pay online and the second most-used payment method in ecommerce, there are still potential risks that your information may be exposed in a data breach or fraud. This is where virtual credit cards come in, offering an additional layer of security to safeguard your sensitive data.

In this article, we will walk you through the basics of a virtual credit card, from what it is to how it works, its benefits and limitations, and how to get one so you can be well-equipped in this digital age.

A virtual credit card is a digital version of your physical card. However, each virtual card has a different 16-digit number, expiration date, and CVV code from your actual card.

Typically, you can generate disposable virtual card information for online and card-not-present transactions. This security feature safeguards your credit card details from being stolen when making online purchases.

Did you know? Without the cardholder present at the point of sale, card-not-present (CNP) transactions are more vulnerable to fraudulent activity.

Virtual credit cards function like your regular credit card but without a physical form. They allow you to generate different numbers for different transactions and make secure online payments without exposing the payment details of your primary card.

You can usually generate and manage virtual credit cards online, with options to:

• Create unique numbers: Use your bank’s online banking platform or a dedicated virtual card provider to create a new virtual card number for each transaction.
• Set spending limits: Control your spending by setting limits for each card.
• Freeze or cancel cards: Easily freeze or cancel cards if you suspect unauthorized transactions.
• Track card spending: Organize your expenses by keeping tabs on all your card transactions.

These virtual credit card numbers can be used for card-not-present transactions (CNP), including online shopping on ecommerce websites and paying streaming services.

Virtual cards are primarily designed for digital use and cannot be swiped or inserted into a card reader. However, you can usually add your virtual card to mobile wallets like Google Pay or Apple Pay and use your phone for contactless payments at certain retailers.

Virtual credit cards offer great benefits matching the need for security when making online purchases. They provide privacy, convenience, and cost-efficient control for both personal and business payments.

Let’s look at some of the most notable advantages of virtual cards.

With over 3,200 cases of data compromises reported in the US in 2023, ensuring the security of your online payments should be a top priority.

Since each virtual credit card transaction uses a unique and temporary number, your actual credit card details remain protected, ensuring the privacy of your financial information and protecting it from being used for fraudulent transactions.

Unlike the additional costs and time that might take you to apply for another physical card, generating virtual credit card numbers with major issuers like American Express, Capital One, and Citi is typically free, as these virtual cards simply draw from the credit limit of your primary card.

Creating multiple virtual card numbers without extra costs means you can generate a unique card number for each one-time or recurring transaction, such as paying suppliers or subscriptions. This makes virtual credit cards a cost-effective and secure way to pay when shopping online.

Caution: While creating a new virtual credit card is free, it is important to note that certain fees, like foreign transaction fees, still apply depending on the terms of your main card.

Virtual credit cards offer an even more convenient and secure online shopping experience. They can be generated instantly via your online banking or card provider’s platform, with each virtual credit card transaction assigned a unique number for easy expense tracking and cash flow management.

And since you won’t be making payments directly with your primary card’s details, you reduce the chances of your personal and financial information being stolen by unauthorized parties.

Virtual business credit cards offer enhanced security and facilitate organized company spending, particularly for businesses that frequently purchase online from various vendors.

Companies can assign specific virtual card details, including setting a spending limit for a transaction, to prevent overspending and maintain tight budget control.

What’s more is that, by assigning a unique card number to an employee or department, businesses can easily track and categorize expenses, simplifying the accounting and reconciliation process.

Although virtual credit cards allow you to make online payments more securely and offer other benefits, they also have limitations compared to physical cards.

For instance, some credit card issuers may limit how long the virtual card is valid for making payments. This validity period varies widely, with some expiring after a short time, typically 48 hours, while some can be active for longer durations.

Another drawback is that not all merchants accept virtual credit cards for payments, and they may not be suitable for certain types of transactions, such as hotel bookings or car rentals that may require a physical card to finalize the sale.

They also can’t be used at a physical point of sale, as virtual cards are just numbers without a chip and magnetic stripe that are necessary for in-person transactions.

Lastly, requesting a refund or returning the product may be complicated since the virtual card number may have changed or expired.

To get a virtual credit card, you’ll first have to have an existing physical credit card. Then, make sure that your card issuer offers this feature.

There are several ways to get a virtual card number for when you shop online, including directly through your bank or credit card issuer, third-party virtual card providers, and digital wallets.

Typically, you can request a virtual card number through the bank or card issuer’s online services, such as Capital One Eno and Citi Virtual Account Numbers.

After logging in to your credit account, you should be able to create one in a section related to “Card Management,” “Virtual Cards,” or “Digital Cards.”

Once you click to generate a new card number, you can usually customize your virtual card with features like:

• Spending Limit: Set the maximum amount the card can spend, which can be different from the limit of your primary card.
• Expiration Date: Choose how long the card will be valid for purchases.
• Merchant Restrictions: Some issuers allow you to lock the card to a specific merchant or eligible purchases, preventing unauthorized transactions

If you cannot generate a virtual card directly with your bank or credit card issuers, you can still get one through a third-party virtual card provider like Privacy.

These virtual card providers are intermediaries that link your credit card to their platform, which is ideal if you hold several credit cards issued by different banks.

They also offer features similar to those of banks or card issuers, like customizable spending limits, merchant locking, and subscription-specific cards, but with the added convenience of creating virtual numbers for all your cards in one platform.

Most digital or mobile wallets like Apple Pay and Google Pay allow you to generate virtual card numbers linked to your credit card, offering an extra layer of protection when making online payments with their services.

In most cases, you can also use digital wallets to pay with virtual credit card numbers for in-store purchases. Once you have added the virtual card to your mobile wallet, simply use your phone for tap-to-pay transactions at merchants that accept this type of contactless payment.

Whether you’re looking for a safe online payment method for personal or business transactions, virtual credit cards offer a flexible solution with enhanced convenience and security.

However, it’s important to keep in mind that virtual credit cards also have their limitations and carry the risk of data exposure like other types of online transactions. It’s always vital to stay vigilant and practice safe online shopping habits, such as avoiding public Wi-Fi and monitoring your accounts regularly for suspicious activities.