What Is A Virtual Credit Card And How Do They Work?
Technology has revolutionised the financial industry by introducing new ways for people to shop, make payments, transfer money, and manage their investments. One great example of these innovations is virtual credit cards. These instruments have progressively substituted their physical peers and have made the checkout experience – both in-store and online – more seamless than ever.
Virtual credit cards 101
Virtual credit cards are temporary 16-digit numbers that are associated with a physical or main card. They allow users to shop in-store and online or authorise others to do so. These numbers are generated on the client’s request for a certain transaction or as a way to facilitate one.
Their temporary nature makes them safer than providing the number of the actual card as the data will only remain useful for a certain period.
Virtual credit cards are issued by the financial institution that issues the main card or they can also be provided by a third party. Nowadays, there are many companies that offer virtual credit cards. The application process for one of these is quite simple and can usually be completed online.
For a business, virtual credit cards are a great solution to shield the company’s main cards from being misused. Companies can issue virtual cards on an as-needed basis for a certain department or person. It is easier to track the expenses made by these different actors by using separate cards rather than trying to sort all of the expenses made with a single instrument.
How to set up a virtual credit card?
Virtual credit cards can either be issued by a financial institution or by a private financial services firm that uses an existing physical card as the main card to then create virtual extensions.
The first step to setting up a virtual credit card is to decide which provider you go with. Even though some banks issue virtual cards directly or offer a platform through which virtual extensions can be created, other financial institutions are not yet offering these products.
If you are going with a third-party provider, make sure it is a reputed company located in a well-regulated country. Once you have selected the provider, you will have to provide sensitive personal and financial information - including the data from the main credit card. Make sure the website through which you provide this data is secure, you can check this by clicking on the padlock icon located on the address box of your web browser. By clicking on this icon, you can confirm that your connection is secure.
Then, follow the instructions provided by the company to create your virtual cards. All billings will appear on your main card’s statement as if they were made with that card alone but your provider’s interface should allow you to check the individual transactions made with each virtual card you have created.
Benefits of virtual credit cards
Using a virtual credit card can carry significant advantages for a business that wants to manage its expenditures better.
The following is a list of some of the most prominent benefits:
- A safer way to make payments: handing over the business’s credit card information to a lot of people can increase the risk of fraud. With virtual credit cards, it is easier to keep track of who is paying for what while individualised statements facilitate the process of identifying potentially fraudulent transactions.
- Easier to track and control expenditures: virtual cards can be issued for a limited period and a maximum spending limit can be set for them as well. This allows business owners to monitor and control how much money a certain department or person is disbursing on behalf of the company.
- Contactless payment method: with the pandemic, the need to reduce physical contact when making in-store payments increased. However, even when the health crisis is over, contactless payments will probably remain a great way to complete transactions faster and safer. Virtual credit cards are a contactless medium as they can be carried in a smartphone in the form of a QR code or picture that will be scanned and processed by a PoS device.
- Cancel at any time: if the data of a virtual credit card is lost, stolen, or suspected to be compromised, the business can rapidly cancel the card to prevent it from being used by unauthorised parties.
- Low fees: issuing a virtual card is both fast and relatively cheap. Most providers nowadays charge less than $10 per card per month and they could offer many perks depending on the service package the business chooses.
Finally, if you are wondering which of the virtual cards out there will be the right fit, here’s a great resource to learn how you can choose the best virtual credit card for your business.