Pros and Cons of Virtual Credit Cards

What Is a Virtual Credit Card?

A virtual credit card is a digital, one-time card number that differs from the number on your credit card and can help protect your account from fraudsters. Virtual credit cards often are used for online purchases.

The 16-digit number for a virtual credit card is connected to your account, but is not the same as the number on your physical credit card. Additionally, the security code and expiration date for a virtual credit card differ from the security code and expiration date on your physical credit card. A virtual card might even come with a different credit limit.

A virtual credit card typically can be used only online. In some cases, you might need a special app, special browser extension or another tech tool to take advantage of a virtual card number. You may also need to use it with your laptop or desktop computer rather than a mobile device.

Otherwise, virtual credit cards are pretty much the same as their traditional counterparts. For example, virtual card transactions pop up on your monthly statement just like physical card transactions do.

How to Get a Virtual Credit Card

You can request a virtual credit card from your card issuer through the issuer's website or app. Keep in mind, though, not every card issuer offers virtual cards.

American Express and Capital One are among the issuers that provide virtual credit cards. Capital One provides a different number each time you ask for one. On the other hand, American Express supplies a virtual card number and provides dynamic security codes every time you use the card.

Benefits of Using Virtual Credit Cards

Not every virtual card works the same, so the features can vary. But here are four benefits you likely can expect from virtual credit cards.

Heightened Security

One of the key benefits of a virtual credit card is that it's much easier to cancel than a physical credit card, potentially keeping your account safer.

When a physical card is lost or stolen, you generally must cancel it and await the arrival of a new card. But when you need to cancel a virtual card number, you normally can do so by logging in to your account and following the card issuer's directions—all while still being able to use your physical card.

Additionally, virtual credit cards aren't directly connected to your physical card or your account details, cutting back on the risk of fraud. Still, information from a virtual credit card might be as prone to hacking as information from a physical credit card.

Better Control of Spending

Virtual credit cards can help you keep tabs on spending. That's because some of these cards enable you to set spending limits.

For example, if you give your teen your credit card number to make a purchase online, a virtual card might prevent them from going overboard. Or a business might provide virtual cards with dollar limits to limit employee spending.

Greater Convenience

It seems obvious, but a virtual credit card doesn't require you to keep track of a physical card. So, when you're ready to make a purchase from a merchant that accepts virtual cards, you don't need to scramble to find your physical card.

Ease of Online Purchases

A virtual card might simplify online shopping. For instance, rather than typing out a card number every time you make an online purchase, you may be able to rely on virtual card numbers that autofill the spots where payment information is entered.

Drawbacks of Virtual Credit Cards

Here are four potential drawbacks of virtual credit cards.

Trouble With In-Person Transactions

You can't use a virtual credit card for in-store purchases, such as buying groceries. In addition, a virtual card might not be ideal if you need to verify your identity when you're picking up an online order. Furthermore, a virtual credit card may not work if you need to produce a physical credit card when you're checking into a hotel or renting a car, for example.

Tech Issues

If a virtual credit card is tied to a browser extension, you might need to rely on a laptop or desktop computer to use the virtual card number. Therefore, a mobile device might not be able to accommodate a virtual card number.

On top of that, you simply might be more comfortable with low-tech physical cards than high-tech virtual cards.

Problems With Recurring Transactions

Because a virtual card number is usually temporary, it might not be wise to use one for recurring payments, such as credit card bills. Why? Because the virtual card might expire ahead of the next payment due date.

Lack of Widespread Availability

Traditional credit cards have been around since the 1950s. Virtual credit cards, on the other hand, are newer innovations. Some credit card issuers do not currently offer them.

How to Decide if Virtual Cards Are Right for You

Even though a virtual card isn't a permanent replacement for a physical card, it still may be a good idea to use one as protection from fraud or as an emergency backup in case you lose track of a physical card.

Here are four questions you should ask to decide if virtual cards are right for you:

1. Are you a digital fanatic? If so, virtual cards may be a great alternative to physical cards.
2. Do you do a lot of online shopping? If you do, virtual cards might help beef up your online security.
3. Do you do a lot of shopping at brick-and-mortar stores? If this is the case, you might prefer physical cards (or a digital wallet) over virtual cards.
4. Are you seeking flexibility in terms of where you can use a credit card? If so, a more widely accepted physical card might be preferable to a less accepted virtual card.

The Bottom Line

Virtual credit cards enable account holders to tap into the digital capabilities of payment technology, offering potential benefits such as enhanced security. However, virtual cards might not be right for everybody, like someone who does a lot of shopping at brick-and-mortar stores. Knowing your shopping habits can help you make the best choice for your situation.