Virtual Credit Cards Explained: 9 Tips for Using Temporary Cards

Here’s what to know about using a temporary credit card.

Security breaches are making front-page news on a regular basis, causing consumers to be hesitant about using their credit cards for online shopping. In response to customer concerns about credit card fraud, many credit card issuers now offer virtual credit cards. A virtual credit card is not really a credit card at all; rather, it’s a virtual credit card number. A new number is issued for each purchase you make, making it difficult for cyber thieves to use a stolen card number. Here’s what you need to know about virtual credit cards.

9 Tips for Using Virtual Credit Cards

Virtual credit cards can be used for single online purchases or be linked to a specific vendor for recurring payments. An initial setup process is required, but using your VCC is largely transparent after installation. Here are nine things you should know about how virtual credit cards work:

1. You Must Have an Existing Account to Use a Virtual Credit Card

You can use virtual credit card numbers for online shopping or paying bills online. The virtual card numbers are linked to your existing credit card, so the charges appear on your regular monthly statement. At the checkout, the merchant receives the virtual card number, rather than your actual card number.

Credit Cards 101: How Credit Cards Work

2. You Can Install a VCC on Your Computer or Phone

To use a VCC, you must install software that generates random credit card numbers every time you request one. Some providers have a mobile app as well, which integrates with your phone’s wallet and allows you to use virtual card numbers when you use your phone to pay.

3. You Can Use a Virtual Credit Card for Monthly Payments

Every temporary credit card number is limited to a single vendor. Because the number can be used repeatedly by that one vendor, a VCC is ideal for recurring payments. Each number is valid for a year, so you’ll need to update your account with a new card number annually. When you set up recurring payments with your virtual credit card, set the limit high enough to cover all of your payments for a year. If the limit is reached, you’ll have to update your credit card information at the vendor with a new virtual card number.

4. You Can Set Limits for Different Merchants

Each temporary number generated for you can be set with a maximum limit for a particular vendor. Where your security is concerned, setting dollar limits for each virtual number decreases fraud potential and creates a boundary for loss. You can create accounts with online stores and use that account similar to the way you’d use a gift card; the preset limit serves as your maximum value available with that vendor. When the limit is reached, the virtual credit card associated with the vendor will no longer be usable.

5. Virtual Credit Cards Are Only Available From Select Issuers

Check with your credit card issuer to see if it offers a virtual credit card. If your particular card doesn’t allow for this feature, the bank that issued your card might offer to switch you to one that does, if it offers it. For example, Bank of America’s ShopSafe service is the company’s virtual credit card offering. It’s designed for account holders with either a Visa or Mastercard, who also use online banking. Citi offers virtual credit card numbers for some — but not all — of its credit cards.

Learn: How to Protect Yourself Against Credit Card Fraud

6. You Can Use a Third-Party Virtual Credit Card

Entropay allows users to create virtual credit card numbers instantly, making it a good option for consumers whose credit card is from another issuer or who want to use a prepaid card. The transactions you perform with Entropay virtual cards don’t appear on your billing statement. The drawback is that your bill will show a charge from Entropay, not the merchant, which might make tracking your spending more difficult.

Another option, Final, issues Visa cards that allow you to generate virtual numbers for use online or with the wallet on your phone. For those who like to go cashless, Final generates a VCC number on the fly so you can pay with your smartphone. You also get 1 percent cash back on Final’s Visa card.

7. Virtual Credit Cards Only Work Online

Virtual cards won’t protect you from credit card skimming and other credit card fraud that occurs at the point of sale. You can only use an instant virtual credit card number when shopping or paying bills online, or when using a mobile app to make purchases using your phone’s wallet.

8. You Still Need to Monitor Your Statements and Credit Score

Hackers and other criminals are constantly looking for ways to get around security measures. Virtual credit cards are a step in the right direction, but you still need to be vigilant. No security method is 100 percent foolproof. It’s still important to carefully examine your monthly statements and keep your credit card secure. The good news is that using a temporary credit card number will allow you to pinpoint where fraudulent activity took place if it ever happens.

9. You’ll Likely Have More Access to VCCs in the Future

The virtual credit card industry is still in its early stages. Today, some card issuers have decided not to issue virtual credit cards or have canceled programs they previously had in place. One of the early adopters of the virtual credit card, Paypal has since discontinued its offering. Paypal is confident that its existing fraud protections are sufficient to prevent unauthorized use of its credit cards. But as the technology matures, it’s likely that more issuers will offer virtual, temporary credit card options.

Find Out: How to Report Credit Card Fraud

If major security breaches continue, you might see more credit card companies offering this type of service, and more new providers coming into the field. A virtual credit card could be a good choice for you if you frequently shop online, or if you pay your bills online using a credit or debit card, and are concerned about fraudulent use of your credit cards.