Even though the technology was invented back in 2009, virtual credit cards have become increasingly popular over the last few years. However, you still might not know what virtual cards are and why (or if) you should be using them. Here’s how using physical and virtual cards together can benefit your business—by granting more control over your finances, protecting sensitive information, and minimizing the risks associated with online transactions.
What you need to know
- Virtual credit cards generate a new card number for each purchase. This reduces your risk of fraud and identity theft, and makes virtual card payments more secure than physical cards.
- Most banks and banking providers now provide virtual card options within their app or as an addition to your digital wallet.
- By issuing virtual credit cards, business owners can efficiently manage budgets and expenses with custom spending limits, payment tracking, and user-based access.
How do virtual credit cards work?
Virtual credit cards are essentially digital versions of your business credit card that use a unique digital number instead of a physical credit card number. Once you receive a virtual credit card from your credit card company, you can use it for any online transaction. To make a purchase, you simply use the unique details of your virtual card (typically stored on your device or browser) instead of inputting the numbers from your physical card.
These details are processed securely by the payment system, and the transaction is completed using the available credit or funds. Virtual credit cards are designed to be extra secure and easy to manage. They help keep track of your online purchases and provide added protection against fraud. Using virtual credit cards usually gives you more control and peace of mind when making purchases online.
How virtual credit cards are different from regular business credit cards
To use a virtual credit card in-store, simply add it to your digital wallet and tap your phone on the store’s tap-to-pay terminal. However, if the store doesn’t have a tap-to-pay terminal, you’ll have to use a physical card, which may limit the places you want to use your virtual card.
Overall, when making purchases, physical and virtual credit cards are largely identical, but under the hood, virtual cards are more secure than physical cards. For every transaction, your virtual card generates a unique card number, protecting your actual card information from fraudsters.
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What are the benefits of having a virtual credit card?
There are several advantages to having a virtual credit card, including:
- Use it right away. With virtual cards, there is no need to wait for your physical card to arrive in the mail—you can start using it as soon as you’re approved.
- Protect your account info. Since there is no physical card to be lost and digital security is high, you are less likely to be the victim of theft or fraud when you use your virtual credit card.
- Easily track purchases. Like traditional credit cards, virtual credit cards allow you to track your purchases online in a secure location.
- Share access with your team. Virtual cards can be shared with your team members, and you don’t have to worry about keeping track of lost, stolen, or misplaced cards.
- Set spending limits. Helpful account management tools within virtual credit card platforms allow you to set custom spending limits so you and your team can stay within budget.
How do virtual credit cards help prevent identity theft?
Virtual credit cards play a crucial role in preventing identity theft by safeguarding sensitive personal and business information. As mentioned above, virtual cards generate unique credit card numbers for each transaction, so that the numbers can’t be reused or stolen. Virtual credit cards typically also have shorter expiration dates, adding an additional layer of security.
How to get a virtual credit card
Most banks and banking providers now provide virtual cards along with any credit card account. To start using a virtual credit card, simply follow the steps below:
- Choose a credit card issuer.
- Apply for a credit card.
- Once approved, sign in to your banking provider’s online dashboard or mobile app and request a virtual credit card. You’ll receive card information which you can use to make online purchases or load your card onto a digital wallet. If you’re a business owner, you should also be able to start issuing virtual credit cards to your employees.
Be sure to check for any fees or transaction limits that apply to your virtual cards.
How to use a virtual credit card to complement your physical card
Using a virtual credit card in conjunction with your physical card can provide added security and peace of mind as you manage your business finances. Here are some tips on how and when to use your virtual card alongside your physical credit card:
1. Online purchases
Use your virtual credit card for online transactions, especially on unfamiliar or less secure websites. This helps protect your primary card information from potential data breaches.
2. Subscription services
Link your virtual card to recurring subscription services to have more control over payments. You can easily cancel or change the virtual card details without affecting your primary card.
3. Travel expenses
When traveling, using a virtual card for hotel bookings, car rentals, and other travel-related expenses can increase safety and provide peace of mind. If the virtual card details are compromised, your primary card and personal information remain secure.
4. Budgeting and expense tracking
Assign specific virtual cards for different budget categories or departments within your business. This helps you manage expenses more efficiently.
5. Temporary payments
If you need to make a one-time payment to a vendor or contractor, you can create a virtual card with a set spending limit. This ensures that only the designated amount can be charged, preventing any unexpected charges.
Should you also get a virtual debit card for business purchases?
Virtual credit cards aren’t the only digital card you can use for business purchases. To activate a virtual credit card, you need to be approved for a credit card. A virtual debit card, however, is tied directly to your business checking account, so you can activate it right away and get real-time access to your funds without needing a physical card.
And like virtual credit cards, virtual debit cards are more secure for multiple reasons:
- Your card information is randomized every transaction, so even your vendor can’t see it.
- You can issue virtual debit cards to employees without needing to coordinate physical cards.
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Frequently asked questions
How do you use a virtual credit card?
For online purchases, simply input your card’s information normally, as you would with a physical card.
For in-person purchases, activate your virtual card in your digital wallet, then tap your phone at any tap-to-pay terminal.
Are virtual cards safe to use?
Virtual credit cards are more secure than physical credit cards for a few reasons:
- Virtual credit cards generate new card information every transaction, which hides your physical card information and makes it more difficult for hackers to find you.
- It’s much more difficult to steal a virtual credit card because there’s no physical card and your card information is protected by advanced cybersecurity.
- As a business owner, you can share virtual cards with your team, but also track purchases and implement spending limits (including single-use).
- If your or an employee’s virtual card were to become compromised, you can freeze it and issue a new one from your banking provider’s mobile app or online dashboard.
Remember to review the terms and conditions from your virtual card provider, understand any fees or restrictions, and regularly monitor your virtual card transactions for unauthorized activity.
What’s the difference between a virtual credit card and virtual debit card?
Virtual cards are digital versions of your physical cards that you can use to make payments online or in-person with a mobile device.
The main difference between a virtual credit card and a virtual debit card is where the funds come from. A virtual credit card draws on the line of credit associated with your business credit card, while a virtual debit card pays using the money in your business checking account.
Both cards offer these benefits:
- Your card numbers are randomized every transaction, so a hacker can’t see your information even if they gain access to your vendor’s transaction history.
- You can issue virtual cards to your team without needing to keep track of physical cards.
Should I use a virtual credit card or debit card for business?
Virtual credit and debit cards are both flexible, secure methods of making payments online and in-person, but differ in where they draw funds to make payments. You should use both payment methods for your small business.
Virtual credit cards draw from your business credit card, which means you can draw funds within your credit limit to build business credit, pay for large expenses, and earn rewards. Meanwhile, virtual debit cards draw from your business checking account funds, which makes them better suited to managing your existing funds, such as when making recurring payments.
