Virtual Credit Card

How can your business benefit from Virtual Credit Cards?

Virtual credit cards have been around for quite a while, following the trend of increasingly digitized wallets. As with other cards (IDs, passports, health insurance, etc), payment methods also migrate into our smartphones. They afford their owners security, privacy, and convenience that traditional cards can’t provide, and that makes them so popular among business owners.

What are virtual credit cards?

Virtual credit cards are basically 16-digit numbers, issued on top of your regular card, which can be used just like your normal card.

Imagine a card that is reduced to a unique number, on which you can deposit funds and make it available to your employees to pay for services. A card that does not expose your main credit card to possible online thefts, putting a degree of separation between your finances and the merchants. The virtual card performs the same role as your regular card, without having to share data that is vulnerable to theft, especially on sites you do not trust. It is also an instrument that allows you, as a business owner, to control the spending of your employees. You can easily share it with a friend in need. And it can be closed and replaced in a matter of minutes, whenever needed.

Right now, Bank of America, Citibank, Discover are the major players in providing virtual credit cards in the United States.

What are the advantages of Virtual Credit Cards?

  • Virtual credit cards are normally free, and their use does not incur fees.
  • Virtual credit cards can be either issued for one-time payments or have a set deadline or amount allocated on them. You can choose an option that gives you the most flexibility and security, depending on your situation.
  • It keeps your main account information safe and secure. After payment, a merchant has your billing address, card number, expiry date, but not CVV. Yet, there are gateways that could process the card when you type 000 as CVV. Your virtual card shields you from that risk.
  • Providing a one-time-use credit card number masks your real credit card identity.
  • Cyber threats and data breaches are on the rise, creating disruptions to businesses. That is especially inconvenient in case of recurring payments needed to run your business. Using a virtual card gives you an opportunity to avoid unnecessary trouble, in case of security issues.
  • Often, cards are limited to one provider (you can decide with which merchant it is used). That makes them convenient when it comes to recurring payments to the same provider - you can set the amount that can be charged on them, as well as the expiry date. And you are saved from the hassle of tracking down each recurring or due payment that has to be now tied to a new card number.
  • When your real card is stolen you can get a virtual replacement immediately.

Also, you can have as many of these cards as you want! This feature gives you a possibility to tie each particular number with particular service providers, business partners, employees, and merchants. Some banks allow you to manage this via your browser extension, which you activate each time you want to make a payment online.

What should you be careful with while using virtual credit cards?

As with any innovation, credit cards are neither a bulletproof solution to potential risks nor the ideal solution in case of trouble with your daily purchases. Imagine, for instance, having to give back something you have paid for in a shop with your virtual card. Receiving a refund directly on your card might not be possible, because of the nature of these cards - and you will have to accept a gift card instead. Or the card expired by the time you want to claim your rights, causing other troubles tracing it back to you. Similar problems occur in case the merchant did not ship the purchased items to you. Using a virtual card makes it more difficult to claim your rights in such cases.

In some cases, the protection of your transaction while using virtual cards is lower than if you used your regular card, which can be a deterrent for some. In case the card gets compromised, banks are less inclined to have your back when the virtual card was used. It is worth considering purchasing fraud insurance when your wallet becomes largely virtual.

For what kinds of payments are VCCs suitable?

Due to their temporary nature, virtual credit cards are not ideal for recurring payments - yet, some companies do it, by generating a dedicated number to a dedicated service/good. It’s worth considering for which services they’re actually optimal in your case. As an owner, you still have to remember the number and possibly store it somewhere safe, which could also become problematic.

Depending on the provider, some of the virtual cards can be limited to a certain type of payment - for example, they can only be used for online or phone payments. The cards are also not a universally offered alternative to your regular card, especially in the “offline” world, where they usually cannot be used.
A virtual credit card feature is not provided by all the banks, with some withdrawing from the service due to various difficulties.

So, are VCCs worth it?

Despite some disadvantages, virtual credit cards offer convenience and safety that have not been available to business owners and consumers before. With a good degree of security measures and introduction of right practices, you get not only a reliable alternative to fraud-prone modes of payment, but also save time on bookkeeping and tracing various records in your company at the end of each month.

  • Barclays
  • Techstars
  • Nestholma
  • Nordea
  • Tekes
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