Credit card fraud isn’t just a hassle for cardholders. It also hurts businesses, banks, and credit card issuers.The Federal Trade Commission (FTC) shows it’s rising and continuing to get worse.
With the wide impact of credit card fraud, it’s no surprise that everyone is looking for ways to reduce credit card fraud. One way to do that is with virtual credit cards.
Virtual credit cards in general are becoming more popular. According to Affiliated Market Research, the global virtual card market was valued at $281.22 billion in 2021 and is projected to reach $1,893.1 billion by 2031.
What Is A Virtual Credit Card Service?
Virtual credit card numbers are created for specific purchases. They are connected to a bank account, debit card or credit card. A virtual credit card works pretty much like a physical card. You receive a 16 digit credit card number, security code, and expiration date that can be used to make online purchases or purchases by phone. You may be able to use them to make in-store purchases with certain retailers or by using a digital wallet.
Virtual card numbers can be designed to be used multiple times, to pay for a subscription for example, or as a one-time use card.
The reason they are helpful for preventing fraud is that their individual use is limited, either to the assigned merchant, as a one-time number, or with a specific credit limit. If a hacker were able to get ahold of the card details, it would be hard for them to do a lot of damage. (That doesn’t mean they are completely fraud-proof. However, if the card is tied to a credit card account you are protected against most fraudulent transactions under federal law.)
There are two ways to get a virtual credit card:
One is through your credit card issuer, if it offers them. This is the ideal scenario; once you are approved you can then create virtual card numbers and any charges will be tied to your credit card.
But if you can’t qualify for a credit card that offers virtual card numbers, you may want to choose a virtual credit card service which will offer virtual credit card numbers tied to a bank account or debit card.
Pros and Cons Of A Virtual Credit Card Service
While the reasons that someone may want to use a virtual card in place of their regular credit card for their online checkout process have been briefly mentioned, it is important to look at the pros and cons of virtual credit cards and virtual card services as a whole.
Great for trial subscriptions to avoid renewals
Easy to cancel or stop further charges
Less security risk overall
Set spending limits for each card
Open and close them without impacting your credit scores
Virtual card services may be available without good credit
Small businesses can assign to cards employees
May miss out on bonuses/points if not tied to a rewards card
Mostly limited to online payments or online shopping
May cause issues with some types of returns
Limited number of providers offering them
Card services may charge fees
What To Look For In A Virtual Credit Card Service
Credit card providers are in some ways in the best position to step into this space and provide customers with virtual credit and debit cards, but not all banks and credit card providers have decided to provide these services to individuals or small businesses. Perhaps with the rise of digital wallets, digital currency, and the surges in ecommerce sales, more card companies and financial institutions will be offering virtual cards, but in the meantime third party businesses are stepping up.
Virtual credit card services provide virtual cards that will then be tied to a bank account or debit card for payment. There aren’t many of these businesses out there yet, some and it is important that consumers look at their options before deciding on a virtual credit card service.
There are many factors to keep in mind when you look for a virtual credit card service:
Number of virtual credit cards you can create
Terms and fraud protection
Security measures are especially important here if these virtual card numbers are associated with a bank account or debit card. Credit card purchases are protected under a federal law, the Truth In Lending Act, that limits responsibility for most fraudulent transactions to $50.
Debit card transactions are covered by a different law, the Electronic Funds Transfer Act, and liability can start at $50 and go up from there. That law does not apply to business debit cards. Federal law offers limited protection for compromised business bank accounts.
Again, virtual credit cards are usually created for specific purchases with limited spending limits, but it’s still wise to be careful when choosing and using these services.
Best Virtual Credit Card Services
Privacy is a third party virtual credit card number service and is the most well known in this space. It offers three different pricing plan options ranging from $0/month to $25/month each with its own features. The free account offers up to 12 numbers per month, for example, while the Pro account ($10 a month) allows you to create up to 36 card numbers a month and offers 1% cash back for eligible purchases up to $4500 a month
You can connect a checking account or debit card from a US bank or credit union as a funding source for your Privacy card account.
With US Unlocked you can create virtual cards for online shopping with specific merchants. You can create merchant-specific cards or one-time use cards. In the US you’ll use a bank account to load the card. Other countries offer other options.
Pay attention to fees, though. There is a 50 cent transaction fee, $3.50 monthly maintenance fee, and $11.50 unload fee. The load fees vary.
Wise is known for its international wire transfer services. It also offers a virtual card, the Wise digital card, that works from your phone. You can add it to Apple Pay, Google Pay or other digital wallets. You can have up to three virtual cards and you can freeze them after each purchase.
It is available in the US (except Nevada) and other countries. You must have a Wise account. You will need to order a physical card but Wise says you can start using your virtual card sooner. It is free to customers with personal or business Wise accounts.
If you are looking for virtual credit cards, your best bet may be a card issuer that offers the option of creating virtual credit card numbers. This allows you to use these card numbers without revealing your main credit card number when you make a purchase.
Here are some options to consider:
Capital One Eno is a browser extension that allows Capital One members with specific cards to generate virtual credit cards. The main benefit for Capital One members, besides those that come with virtual cards, is that these virtual card purchases still count towards points/bonuses.
Citi’s virtual cards are similar to Capital One in that you need to have specific cards to have access to the virtual card option. You have the ability to generate virtual card numbers for online purchases.
Small business owners looking for a card with unlimited virtual credit card numbers may want to consider dash.fi. You’ll be able to create unlimited virtual cards instantly for specific merchants or even to assign to contractors or your advertising agency. Virtual cards are free with dash.fi.
There are other companies that offer savings accounts along with virtual cards for customers. Revolut, Netspend, and other companies offer this service. However, since many of these require a new savings account to be set up, they were not included on this list. However, if you are thinking about opening a new account anyway, you may want to inquire if the financial institution offers virtual cards.