What is a virtual credit card? A complete guide

As U.S. consumers report online shopping scams as the second most common type of fraud, banks continue to search for ways to help keep user data safe.¹ That’s where a virtual credit card can help.

With a virtual credit card, a person can make an online purchase without using their actual credit card details. This can help ensure that sensitive data, such as the actual credit card number, is never revealed during the checkout process and protect users from credit card fraud.

This article explores how virtual credit cards work and what consumers should know before using one.

What is a virtual credit card?

A virtual credit card is a type of payment card that acts as a proxy for an actual credit card. It isn't a physical card — users request a virtual credit card for each transaction or a set time period, and their creditor provides unique, one-time information that allows customers to make purchases without sharing their credit information with merchants.

Virtual credit cards vs. digital wallets

Virtual credit cards only work for a predetermined time period or a specific online merchant. A secure digital wallet stores digital versions of a user's physical credit cards. Since digital wallets stay on a mobile device, users can make in-store purchases if the merchant accepts contactless payment via a mobile device.

A key difference is that virtual credit cards generate proxy credit card numbers to protect users' information. When consumers use digital wallets, their information is encrypted. Additionally, users can use digital credit cards for any tap-to-pay or NFC payment.

5 uses of a virtual credit card

Virtual credit cards offer users an easy way to make secure online payments and safeguard their credit card information. They are useful for many day-to-day contactless purchases:

1. General payments: Virtual cards protect information when users shop online on unfamiliar websites or make one-time purchases, reducing exposure to potential data breaches.

2. Automated payments: Virtual cards with spending limits prevent unexpected charges for recurring subscriptions and services. Users can easily cancel these by deactivating the card.

3. Claims payments: Insurance companies and healthcare providers often use virtual cards to process and distribute claims payments because the process is quick and secure.

4. Travel management payments: Employers can provide business travelers with individual virtual cards. These simplify tracking expenses because they have specific spending limits for hotels, transportation, and meals.

5. Reimbursements: Companies can issue virtual cards to employees for approved expenses, controlling spending while eliminating the need for personal card use and reimbursement processing.

How do virtual credit cards work?

Virtual credit cards generate unique, temporary credit card information as a user requests. Because this information is different from the physical card number, the actual card details aren’t shared within the transaction.

This service protects the user's credit card details from anyone who might steal the information via fraudulent methods. Since virtual credit card numbers are single-use, any transactions after that first use would fail.

The process is relatively straightforward:

• Step 1: The user requests a virtual card through their bank's app or website.
• Step 2: The system generates a random card number, expiration date, and CVV.
• Step 3: The user sets spending limits, expiration date, and usage restrictions.
• Step 4: The user uses the virtual number for online purchases instead of their real credit card.
• Step 5: The bank authorizes the transaction, using funds from the user's primary account.

How to get a virtual credit card

If a user already has access to a credit card, they might already have access to a virtual credit card through that provider. Each card provider may have a slightly different enrollment process, but it typically looks like:

1. The user verifies whether their credit provider offers virtual credit cards.
2. The user logs in to their credit card's online account.
3. The user enrolls in the provider's virtual credit card program if they're not automatically enrolled with their account.
4. The user requests a virtual credit card number from the provider and uses it to complete the transaction.

Potential safety considerations when using virtual credit cards

Although virtual credit cards enable secure online payments with advanced security features like biometric verification and multi-factor authorization, there are some features users may need to opt in for, including:

• Single-use sign-on: The user receives a one-time password via email, text, or call for each login attempt.
• Instant issuance: The virtual credit card creates instant audit trails to make it easier to review transaction history for potential fraud.
• Reporting: The virtual credit card provider may create reports to track spending and spot suspicious activity.

Though virtual credit cards are quite safe, there are additional steps people can take to better protect themselves from fraud. Here are some tips:

• Shop on reputable sites: If a price seems too good to be true or a website lacks many reviews, be cautious, as it may be a scam.
• Monitor transactions: Review statements and online account activity regularly to identify any unauthorized or suspicious charges as soon as they occur.
• Avoid public WiFi: Avoid using public WiFi networks for online transactions because they may not be secure. Instead, use a trusted and private internet connection.

Choosing a virtual credit card provider

There are many options for virtual credit card providers, so it's important to know what features to look for. Beyond basic functionality, users should check security policies and customization options from any provider:

• Consider networks: Look for a provider that operates over major payment networks to ensure that more online merchants will accept the card.
• Understand integrations: Check whether a virtual credit card integrates with banking apps or budgeting tools you already use.
• Prioritize controls: Stay in control of finances and look for features like one-click deactivation, one-click generation, spending limits, and customizable restrictions.