What to know about virtual credit cards

That’s where virtual credit cards come in. Instead of using the permanent account number on your physical card, virtual credit cards give you a one-time-use account number to use for nearly any transaction type. These near-magical cards can help protect your credit card account from fraudsters, plus offer some nifty perks your physical card might not.

What is a virtual credit card?

Virtual credit cards disguise your true credit card details to prevent payment processors and scammers from ever seeing your actual credit card number.

Think of a virtual card as the intermediary between your credit card account and online merchants. Instead of entering your actual credit card number at the point of sale, you enter a completely different number—assigned by your card issuer via a virtual credit card. If your card issuer offers virtual cards, you can generally request one via your online account and finalize your transaction within minutes.

How do virtual credit cards work?

A virtual credit card fulfills payments by charging whichever credit card it’s linked to. This means you’ll still earn points, miles, or cash back when using a virtual card. You can often have multiple virtual cards linked to one or more of your credit cards. You can make temporary cards for a single purchase or keep them open for the lifetime of your card.

Some banks offer virtual cards for free while other third-party companies specialize in issuing virtual numbers for any credit card you want to use. This is a huge boon for those who value rewards or miles earned on cards that don’t directly offer virtual options, like Chase.

How to apply for a virtual credit card

Virtual credit cards are typically (but not always) issued by the same bank that issues your credit card. You don’t have to apply for a virtual credit card because it’s not a new account or additional line of credit. Instead, it’s simply a different account number linked to your current card.

Most banks that participate in virtual numbers allow you to generate one through your credit card’s online account. However, you can always call your card issuer for assistance if you can’t figure out how to get a virtual credit card. And there are some issuers that don’t offer virtual cards at all, so if you can’t find how to create a card, that could be the reason.

Finally, Google may even prompt you to create a virtual credit card at checkout. When you save a card to Google Chrome autofill, you may see a popup from Google asking if you want to enroll that card in a virtual card. This will create another option for your online payments, preventing your true credit card details from being shared.

Benefits of virtual credit cards

“A credit card by itself is great—but a virtual card takes it to the next level,”says Rajeev Subramanyam, Senior Vice President and General Manager at Emburse Pay. He emphasizes the wide variety of capabilities that frequently come with virtual cards as one of their biggest advantages. “You can issue unique card numbers for very specific things…specific to a merchant, specific to an amount, specific to a duration.” The ability to manage a virtual card is significantly improved over a regular credit card as well, and for multiple reasons.

Receive an extra layer of security

Virtual credit cards allow you to use your credit line without ever revealing the sensitive information embossed on the front of your credit card. For example, if a merchant that you use experiences a data breach, you can delete the virtual card you use with them and generate another one to use for future payments—instantly making the payment information stolen by the hackers outdated.

You can even create credit cards that automatically expire after a preset amount of time. When your payment info is constantly changing, it’s far less probable that you’ll become a victim of fraud.

Free trials are less of a hassle

The worst thing about free trials is that you’ve (usually) got to first input your payment information. Then, if you forget to cancel your subscription before the trial period ends, your card will be charged automatically.

Instead of struggling to remember your currently active free trials, you can create and enter a virtual credit card number that expires the following day. Then, when the service attempts to charge your card, it’ll be notified that the form of payment has expired—and that’ll be the end of it.

Keep track of expenses

One very practical use of virtual credit cards is to keep transactions separate.

As an example, some folks tend to mix personal and business expenses on the same credit card. By creating and using a virtual credit card exclusively for business expenses, you’re able to use one credit card for everything—while easily tracking which expenses are for business. This could be a huge help during tax season when you’re scanning your transactions for purchases you can write off.

Simplified business finances

“Some of the big benefits that we see with virtual cards are around control,” says Brent Jackson, CEO and founder of spend management platform, Torpago. He acknowledges the value of these features for personal use, but he emphasizes their importance for businesses. “A lot of our clients implement virtual controls and virtual cards so they can dictate what their team spends on and where they spend the corporate funds…You can issue specific 16-digit card numbers that will only work at certain merchants—or that will only work at a certain time of the day.”

If you’re a business owner, you can use virtual credit cards to ensure that you, quite literally, don’t spend a dime more than you want to. You can create a card with a preset spending limit for a vendor you’re working with to protect yourself from being overcharged; you can keep employees spending on a leash by limiting purchases to specific stores. And you can potentially eliminate grueling expense reports by keeping all employee spending on virtual credit cards (instead of reimbursing them for spend on their own credit card, which leads to endless online forms and receipt uploads).

Downsides of virtual credit cards

Virtual credit cards are no doubt a great tool, but they aren’t appropriate for every situation. They can perplex merchants and make things more difficult than they need to be.

You may not be able to use them in-store

Virtual cards are not physical. You can’t wield them in your hand like you can with a physical credit card. They’re mostly helpful for purchases made through your computer or phone.

Because of this, they may not be usable when shopping in person. However, some virtual wallets may offer the option to add virtual credit cards, meaning that if a merchant’s credit card terminal accepts mobile payment, you could conceivably keep your actual credit card information masked. You could also order products online for pickup and hang around the store until it’s ready.

It may be difficult to receive refunds

When you request a refund on your credit card, the merchant may want to return the money to the card you used for payment. This can be tricky if you’ve used a virtual credit card—specifically one that doesn’t even exist anymore.

Certain reservations could be complicated

When you book a rental car or a hotel stay, you are sometimes asked to present your credit card at the desk. Virtual credit cards won’t match with your online payment details. In rare cases will this devastate your travel plans, but it’s worth mentioning.

The takeaway 

A virtual credit card is nothing more than an enhancement to your current credit card. It adds security to your account by keeping your payment details secret. And it often gives you exponentially more management tools that can help you budget, track spending, and keep tabs on other account users.

Again, a virtual credit card is not a new account—it operates by simply passing charges along to your actual credit card for processing. So there’s no impact on your credit by opening one up—or shutting one down.