Everything from jobs to social interactions seems to have gone virtual lately, and credit cards are no exception.
Virtual credit cards have been around for many years, but consumers are showing increasing interest in using them as a tool to limit the potential damage from identity theft or fraud. Trying to decide if a virtual card makes sense for you? Here’s what you need to know.
How does a virtual credit card work?
A virtual card is not a physical credit card at all. Instead, your existing credit card issuer or bank issues you a “virtual card,” which is simply a temporary one-time credit card number that you can use to make purchases online or over the phone.
You can set options for this number. For example, a virtual number can work with only one seller or for a certain period of time. If a scammer gains access to this number, they can’t use it to make purchases that don’t match those parameters, making it pretty useless.
“Virtual credit cards can be useful for consumers who want to increase the security of their purchases,” says John Breyo, vice president of the National Consumer League, which runs the Fraud.org website. “If I have a virtual credit card number in my Amazon account and Amazon is hacked, my real credit card will not be compromised. The hackers will have this virtual credit card number, which they will not be able to use on any other sites.”
Payments you make with a virtual credit card appear on your credit card statement just like any other payment you make with your regular credit card.
Benefits of a virtual credit card
Virtual credit cards can minimize the damage that hackers can cause if they gain access to your credit card number and help you avoid the hassle of account hijacking.
“While conventional credit cards have strong fraud protection, they still require you to notice a fraudulent transaction and alert your card issuer,” says Jason Steele, director of credit cards at the Money website. “After the issuer cancels the card and sends you a new one, you must update your information with any companies that have your credit card information. It’s pretty annoying.”
If a criminal steals your virtual account number, you will have the same protections as using traditional credit cards under the Fair Credit Billing Act. This limits your potential liability for fraudulent purchases to $50, but most card issuers have a zero liability policy for consumers.
Virtual credit card numbers can also act as a defense against companies that try to charge you for unintentional purchases, such as auto-renewing subscriptions.
Disadvantages of a virtual credit card
Virtual cards require prior work to be used. You must contact your card issuer to request a new number each time you wish to make a purchase. Depending on your settings, you may also not be able to save your card information with the merchant for faster checkout in the future.
Another potential downside is that you may run into difficulties if you need to return an item purchased with a virtual credit card. If the card number has already expired by the time you are trying to make a refund, you may need to complete some additional steps in the process.
While virtual credit cards have many benefits, they are not entirely secure. Merchants may still charge you too much, add fraudulent payments to your account, or accept payments without delivering the promised goods and services.
“One of the downsides of virtual cards is that they can make consumers feel secure,” says Stephen Dashiell, credit card expert at the Finder website. “You wouldn’t want to let your guard down and think you never have to check your account.”
How to get a virtual credit card?
You can get a virtual credit card by requesting one from a credit card issuer with whom you already have a relationship. This can usually be done by visiting the map’s website or logging into the appropriate application.
Once you request a virtual credit card, the provider will provide you with a unique 16-digit number, expiration date, and security code that you can use online just like a traditional credit card.
Not all credit card issuers offer virtual cards, so if your current card does not support this service, you may want to consider purchasing a new card that does.
Some major credit card issuers, including Citi and Capital One, support virtual cards. And American Express is now partnering with Coupa Pay to offer virtual card numbers to U.S. customers for business-to-business transactions.
But some don’t — in September 2019, Bank of America ended its ShopSafe virtual card program.
Some fintech companies also provide virtual card services. For example, PayPal’s PayPal Key allows users to create virtual account numbers that they can use to make purchases, and payments go to their PayPal accounts. The Token app offers a similar service by generating alternate account numbers for users who don’t want to share their credit card information for certain purchases. And X1 Card provides users with auto-expiring virtual credit cards to help them avoid being unintentionally charged when their subscription or free trial expires, and offers many valuable rewards.
Virtual credit cards offer great fraud protection, but you have to work a little to get them. If you’re looking for safer online or phone shopping, consider using them: you’ll get peace of mind for free. However, keep in mind that they are not reliable, so always check your credit card statements to make sure they match your spending.