Using Virtual Cards: Everything You Need to Know

Revolutionizing Online Transactions: The Power of Virtual Cards

As technology evolves, so does the way people sell, shop, and save. In recent years, there has been a clear shift in how people transact, with many individuals moving away from cash and embracing digital payments. Digital payments today offer businesses and consumers a way to pay that is flexible, tailored, and convenient.

Digital payments are also central in the movement pushing for greater financial inclusion, giving the unbanked and the poor a portal to access banking services. More governments are developing programs designed to support competition and innovation in the digital payments space and supporting initiatives to make digital payments cheaper, quicker, and more straightforward.

Available statistics show that the volume of cashless transactions is set to increase by more than 80% by 2025 to a whopping $1.9 trillion. By 2030, per-person digital payments will have almost tripled.

As more consumers embrace digital payments, security remains a major concern; 69% of people who use digital payments have concerns about security. Generally, most digital payment users don’t mind sharing nonspecific and generic data such as their preferences but are reluctant to supply sensitive information like credit card details.

What’s more, they understand the hassle of replacing compromised credit cards and the feeling that using credit cards online is risky but that often the risks seem unpreventable. More than 80% of companies confess that they’ve been hacked at some point. And given how often news breaks about yet another company whose user data has been compromised, the allure of using credit cards for online transactions seems all but faded.

Enter virtual cards!

What Is a Virtual Card and How Does It Work?

A virtual card is a type of digital payment that uses a unique, single-use number to make online purchases. Virtual cards are also known as e-cards or temporary disposable cards. When you purchase with a virtual card, the merchant is charged by the card issuer, and the funds are then transferred from your account to the merchant’s account.

Virtual cards work similarly to physical credit cards, but they are not physical. When you sign up for a virtual card, you are assigned a unique 16-digit number, which is linked to your account. You can use this number to make online purchases at any store that accepts credit cards.

Whenever you use a virtual card, the seller only accesses and stores the temporary card’s information, which protects the actual information of your debit or credit card in the event of a hack or data breach. Virtual cards ensure your credit card information never falls into the wrong hands.

When you use your virtual credit card to shop online, your account statement will show a charge as if you had used your real credit card information. The majority of credit card companies now provide some type of virtual card, but you’ll need a physical credit card from that company before you can ask them for a virtual one.

Types of Virtual Cards

There are four main types of virtual cards: prepaid, single-use, debit/credit, and wallet-based virtual cards.

  • Prepaid virtual cards are linked to a specific account balance, which you can load with money in advance. This card type can be helpful if you want to limit your spending or are worried about overspending. Once the balance on the card has been depleted, you can’t use it anymore.
  • Single-use virtual cards are just as they sound: you can only use them once. After making a purchase, the card is no longer valid.
  • Debit and credit virtual cards are linked to your debit or credit card and you can use them the same way you do physical debit and credit cards. The difference is that the number on the card is not your actual debit or credit card number.
  • Wallet-based virtual cards are linked to a digital wallet, such as Apple Pay or Google Pay. You can use these cards to make contactless payments in stores, online, or through apps.

What Is the Difference Between a Digital Wallet and a Virtual Card?

Digital wallets, such as Apple Pay and Google Pay, are similar to virtual cards in that they are both digital payment methods. However, there’s a fundamental difference.

With a digital wallet, you can store your actual credit or debit card information in the wallet. This information is then used to make contactless payments. With a virtual card, however, the number on the card is not your actual credit or debit card number.

Benefits of Virtual Cards

Virtual cards offer notable benefits over traditional credit cards, making them the ideal payment tool for online transactions. The benefits include:

Leave your wallet at home

Virtual cards are digital, so you don’t need to carry them around. All you need is the 16-digit number and the 3-digit security code.

Shop online with confidence

Your credit card information is never stored on the merchant’s website or server with a virtual card. This reduces the risk of your information being compromised during a data breach.

Get real-time alerts

With most virtual card issuers, you can set up real-time alerts to monitor your spending. This way, you can promptly catch any suspicious activity and take action if necessary.

Instant activation

With a physical credit card, you typically have to wait a few days for the card to arrive in the mail. With a virtual card, you can be up and running a few minutes after it’s created.

Manage subscriptions

Have you ever forgotten to cancel a subscription only to be charged again the following month? With a virtual card, you can set an expiration date for each purchase. That way, you can be sure you’re only charged for the months you use the service.

Dispute unauthorized charges

If you spot a charge on your virtual card that you don’t recognize, you can dispute it immediately. This is much easier to do than with a physical credit card, where you must fill out paperwork and wait for a new card to be issued.

Create multiple cards for different purposes

You’re limited to one card per person with a physical credit card. With a virtual card, you can create multiple cards for various purposes. For example, you could have one card for online shopping, one for subscription services, and one for travel.

Easily cancel and re-order cards

If you lose your physical credit card, you must cancel it and wait for a new one to be issued. With a virtual card, you can cancel it immediately and re-order another just as quickly.

Earn rewards and cash back

Some virtual card issuers offer rewards and cash-back programs. This is a great way to save money on the things you were already planning to buy.

Where Can I Use a Virtual Card?

You can use virtual cards anywhere that accepts credit cards, including online stores, subscription services, travel websites, and more. Most virtual card issuers offer a variety of card types so that you can choose the right card for each purchase. For example, you could use a virtual prepaid card for one-time purchases and a virtual debit card for recurring subscription charges.

You can also make contactless payments in stores using a virtual card by adding it to Google Pay or Apple Pay. Some even let you withdraw cash from ATMs.

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