March 15, 2024

What is a Virtual Credit Card: The Ins and Outs of Modern Virtual Credit

Digital payments are an everyday part of the world we live in — whether you’re making an online purchase for new clothes, ordering groceries for delivery, or paying utility bills. Many stores nowadays even have tap-to-pay options where you can use your phone to make contactless in-store payments.

Unfortunately, one downside to the increasing popularity and wide use of digital payments is the threat of hackers intercepting transactions and stealing credit card details. Having a way to limit how much of your credit card information you expose can help — and that’s where virtual credit cards come in.

If this concept is completely new to you, or you’re wondering what benefits an intangible card might offer, this guide will explain what a virtual credit card is and why you might want to use one.

What is a virtual credit card?

A virtual credit card is a fully digital credit card that you use to purchase goods and services. It has a 16-digit number, a card verification value (CVV), and an expiration date, just like a regular card — only there’s no physical card that comes with it.

Another thing that’s different about these cards is that they usually only work for a very limited period of time or a single use. Having unique card numbers that only work for one or a handful of transactions makes it harder for hackers to steal and use your information.

Typically, when you make an online purchase, you need to input your credit card and contact information, and the retailer then stores this data in their system as they process the transaction. If they don’t properly encrypt your data (keep it concealed as scrambled code), hackers could tap into the system and steal your card information to use for fraud. But, if you use a virtual credit card, the retailer will never get your real credit card data — meaning hackers won’t either.

How do virtual credit cards work?

You can apply for virtual credit cards through your credit card issuer’s website or online portal. Once approved, they’ll supply you with the virtual credit card number through your online account, and any charges you make with it will go toward your existing credit card. Not all card issuers currently offer this feature, so you’ll need to check your issuer’s website or call their customer service line to confirm.

If your credit card issuer doesn’t offer virtual cards, you can either apply for a regular credit card with one who does or you can use a virtual wallet app that offers similar options. The only difference with these apps is that your card doesn’t connect with a credit card; instead, you’ll need to add funds to the app, and your virtual credit card will pull from those funds when you make purchases.

The benefits of virtual credit cards

Virtual cards come with a variety of features that can help you stay safe online and better manage your money. Here are some of the primary benefits of using a virtual card:

- Privacy protection: The temporary card number essentially works as a mask for your physical card number, so you never have to share your real credit information online.

- Added security: Since these cards aren’t physical, you can’t lose them, and no one can physically steal them. You can also set them to expire as soon as you make a purchase or deactivate them at any time if you suspect they’ve been compromised. Anyone who does get hold of your virtual card number will still have no access to your regular credit card number.

- Control over spending and limits: You can assign specific spending limits to any virtual card you open, or you can even apply a different card to each vendor or retailer you make purchases through.

- Convenience and flexibility: You can often use them at in-person stores that accept tap-to-pay or contactless payment methods.

The drawbacks of virtual credit cards

While virtual credit cards are excellent for some payments, they can be less than ideal for others — especially in situations that require a physical card for purchase. Here are some potential drawbacks to using virtual credit cards:

- Security isn’t foolproof: Virtual cards still require a credit card number, meaning hackers can still get hold of that number and potentially use it for fraud if the card isn’t deactivated.

- No option for physical payments: You can’t rely on them for all payment methods, especially in stores that don’t offer virtual payment options or require physical payments like credit cards or cash.

- Inconvenient for certain transactions: They’re not ideal for purchases that need further verification of your card after you make a payment, like booking a hotel or renting a car.

- Dependent on internet access: Since virtual cards are fully digital, they rely on internet access to work. If you don’t have reliable Wi-Fi or a mobile data connection — especially in a store where you’d like to use your virtual card as a contactless payment method — you may not be able to complete a transaction.

The difference between virtual credit cards, digital wallets, and payment apps

It’s easy to confuse virtual credit cards with other virtual payment tools, like digital wallets or payment apps. While you can use all of them to make electronic payments, they each have unique functions. Here's a breakdown of how they differ:

- Virtual credit cards: Your virtual card is simply a substitute for your physical credit card when making payments. It’s only temporary, and you can deactivate it whenever you like.

- Digital wallets: These are apps like Google Pay or Apple Pay that store your payment information, like credit card, debit card, or bank account numbers, on your phone or other Wi-Fi-enabled device. You can use them to make purchases online or in-store by simply tapping your device at checkout.

- Payment apps: Examples of payment apps include Venmo, Cash App, and PayPal. They’re mainly used for peer-to-peer payments, but more businesses and online retailers are starting to integrate them into their checkout options. These apps allow you to link your existing cards or bank accounts for transactions, and some even offer their own branded credit cards.

So, while virtual credit cards stand in for your physical card during transactions, digital wallets and payment apps store your payment information for easy access and use during purchases.

Should you apply for a virtual credit card?

To answer this question, first ask yourself:

-Do you shop online?

-Do you often have to share sensitive payment information electronically?

-Are you looking for tools to help you manage your money and track your expenses?

If your answer to any or all of these questions is “yes,” then consider applying for a virtual credit card. With the added security and handy budgeting features, you’ll gain more control over your financial information and spending capabilities, putting you in a better position to achieve your financial goals and maintain your digital privacy.

Strengthen your financial future with EarnIn

Your finances and your security are two things you should take seriously — and virtual cards can help you improve both. As can EarnIn, by helping you take charge of your money and track your credit.

With EarnIn’s Credit Monitoring tool, you can check your credit score at any time, for free. You’ll get a real-time look at your credit usage, open accounts, and payment history. EarnIn will even send you fraud detection alerts for any suspicious activity regarding your credit accounts.

The EarnIn app also offers a variety of integrated tools and a deep well of resources designed to help you stay informed and manage your money confidently. If you’re looking for a powerful, user-friendly financial tool with mobile access, advanced security, and 24/7 support, add the EarnIn app to your toolkit today.

Download EarnIn today and experience money at the speed of you.

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