Virtual credit cards are a digital version of a plastic or metal card, often created for temporary use.
One reason for using virtual credit cards is to protect users? Did you know that more than 60 million Americans had fraudulent charges on their cards in 2024, with unauthorized purchases totaling $6.2 billion annually? A virtual card might protect you from enduring this kind of loss. Read on to learn more about what they are and how they work.
Key Points
• Virtual credit cards can enhance security by using a temporary 16-digit code instead of the actual card number.
• These cards are primarily for online and some phone transactions, not in-person use.
• Refund issues may arise if the virtual card expires before the refund is processed.
• Managing virtual credit cards requires generating new numbers and handling short usage periods.
• For online safety, create unique passwords with a mix of letters and numbers for each merchant account.
What Is a Virtual Credit Card?
A virtual credit card is a temporary credit card that doesn’t exist as the familiar physical rectangle. It can be used when making online purchases. Their intent to safeguard your actual credit card numbers from fraudsters.
In turn, it could protect your credit card from hackers.
Virtual credit cards are made for temporary use. When you use a card online, the retailer can only see and store the temporary credit card number, adding another layer of protection should a data breach occur.
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How Do Virtual Credit Cards Work?
Not all credit card networks issue virtual credit cards. If a virtual credit card is offered, you get a virtual credit card, with a 16-digit number that is randomly generated. It will also come with a security code and expiration date. This information is tied to your account.
A major perk of a virtual credit card is that they’re intended for temporary use. These cards typically expire after a day, although some have a 12-month expiration date. A new 16-digit credit card code can be generated for each transaction.
Virtual Credit Card vs Digital Wallet
The major difference between virtual credit cards and digital wallets is that with a digital wallet, you would store the exact credit card numbers that are on your physical credit card. With a virtual credit card, you would be using a temporary number that could quickly expire to complete an online transaction.
Another major difference between the two is where they can be used. You can use a virtual credit card for any online purchase where credit cards are accepted. A digital wallet, on the other hand, can only be used at retailers where digital wallet payments are accepted, which might not be everywhere. While digital wallets are gaining greater acceptance, they are not yet used universally.
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Pros and Cons of Virtual Credit Cards
Here’s an overview of the advantages and drawbacks of using virtual credit cards.
|
Pros and Cons of a Virtual Credit Card |
|
|---|---|
| Pros | Cons |
| Greater protection from fraudsters | Generally only useable online or over the phone |
| Flexibility in use | Can be more challenging to use for certain purchases |
| Ability to customize how long the virtual credit card is active | May be more difficult to receive a refund |
| Transactions show up on your account | Can requires extra effort to get virtual credit card numbers |
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Pros
Here are the major upsides of using virtual credit cards:
• Greater protection from fraudsters: The 16-digit number of your physical credit, payment information, and personal information is safeguarded when using a virtual credit card. In the case that a hacker steals your virtual card number, that number will expire shortly. Plus, the hacker won’t have access to your personal information or identity.
• Flexibility in use: You can change your temp card number as often as you like, at the drop of a hat, and create new card numbers for different retailers. You can even set spending limits or freeze your account without the same changes being reflected in your actual credit card account.
• Transactions are posted to your account: While the credit card number is a temporary one, credit card charges made with your virtual card do show up on your credit card statements. In turn, you can keep better track of all purchases, whether using a virtual card with temporary numbers or your actual credit card number. This tie to your account also means you can get cash back rewards with a virtual credit card even if it’s temporary.
• Ability to customize how long the number stays active: Depending on the credit card issuer, you might be able to customize the length of time a virtual card number stays active. Or, you can set a specific spending limit. This might come in handy if you’re using a joint credit card, or if you use a virtual credit card for recurring monthly purchases.
Cons
There are also drawbacks to virtual credit cards that are important to take into account as well. These include:
• Generally can only be used online or over the phone: Due to their nature and intent, virtual credit cards generally can only be used online and for some over-the-phone purchases. So it won’t offer fraud protection when you use your usual credit card for brick-and-mortar purchases. However, if you link your virtual credit card to your digital wallet, you might be able to use your virtual credit card at select physical locations while the number is active.
• Might be more challenging to use for certain purchases: If you’re using a virtual card to book a hotel reservation and the card number expires after 24 hours, it could be challenging when the hotel asks for the same credit card number at check-in time. In those cases, you might need to call your bank or consider using a permanent credit card.
• Might be harder to get a refund: Another scenario when using a virtual credit card can be more complicated is when a refund is issued and the retailer can’t refund the amount to a virtual card after it has expired. In that case, you might have to ask the card issuer to intervene or opt for a store credit instead.
• Requires extra legwork to get: If you want to take advantage of the added security of a virtual credit card number, you might have to make a bit more effort than just swiping your card. You’ll have to contact your issuer each time you want to get a virtual credit card number and stay on top of short usage windows.
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How Is a Virtual Credit Card Number Generated?
Virtual credit card numbers are randomly generated sequences that are linked to your existing credit card account. In some cases, to access the virtual card number, you’ll need to download the virtual card issuer’s app. Other issuers may allow you to do so through their website or through the existing banking app.
Depending on the credit card issuer, you might receive a virtual card number for different merchants. Or, you might receive a randomized 16-digital credit card sequence to use for any merchant.
The number might be good for 24 hours, after which you’d need to request a new number. Some virtual credit cards allow you to choose when a credit card is set to expire. For instance, you might choose for it to expire after a day of use or after several months so you can use the same virtual card for recurring purchases.
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Tips for Protecting Your Identity Online
Even using a virtual credit card number doesn’t make you immune to theft. Here are some ways to protect your identity and virtual credit card online:
• Sign up for a credit monitoring service. This will help you detect any suspicious behavior.
• Use a virtual private network (VPN). For a more secure connection, connect to a VPN when using public wifi.
• Create unique passwords. Passwords to online merchant accounts should not only be unique but should contain a combination of letters and numbers (but not “password123” or something else obvious).
• Set up alerts on your virtual credit card. Setting up alerts on your credit card for online purchases can make you immediately aware of fraudulent activity.
• Use trusted, known sites. For instance, check to see if the site is secure and has “https” instead of “http” in the URL and the lock symbol.
• Beware of scams that pretend to be from your card’s fraud detection team. If you receive an unsolicited email or call from someone claiming to be from the security department of a credit card company and asking you to activate the protection features on your card, beware. It’s likely a scam. You don’t need it, as credit cards typically have built-in liability protection.
Virtual Credit Card Alternatives
If your credit card issuer doesn’t offer a virtual credit card or you don’t think it’s a good fit for you, here are some different kinds of cards you might consider:
• Prepaid credit cards: If convenience when using a credit card for a purchase is top of mind, a prepaid credit card is a reloadable card that you can use for purchases. Note that while these can be an easy way to make purchases, prepaid credit cards may come stacked with fees, don’t have security protections (they’re akin to cash), and don’t help you build credit.
• Gift cards: A gift card is also a safe way to make purchases online without fraudsters accessing your personal information or credit card number. Gift cards can be used for particular merchants or anywhere the credit card network with which the gift card is associated is accepted. They are similar to prepaid credit cards but are typically not reloadable.
The Takeaway
A virtual credit card can provide an extra layer of protection and prevent your credit card and personal information from getting into the wrong hands. However, you can typically only use virtual credit cards for online purchases and some purchases over the phone. Plus, they usually can only be used temporarily, often for one day.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
Is a virtual credit card secure?
A virtual credit card offers added protection as you aren’t using your actual credit card number when making purchases. This helps prevent fraudsters from accessing your actual credit card number and sensitive information. Instead, you receive a temporary 16-digit code with its own expiration date and security code.
Can I get an instant approval for my virtual credit card?
Some virtual credit cards do offer instant approval. Once you receive your random credit card code, you usually can use it right away.
Can you get a virtual credit card anonymously?
No, you won’t be able to obtain a virtual credit card anonymously. You’ll need to request a virtual credit card by logging on to your existing credit card account. Once you make a request, you’ll receive your virtual credit card.
Photo credit: iStock/nesharm
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This content is provided for informational and educational purposes only and should not be construed as financial advice.
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