These days, most of our financial transactions don’t involve actual bills and coins.
Instead, we insert a microchipped card into a machine, type numbers onto a screen or simply hold our smartphones up to a mobile payment reader.
Voila! Money exchanged in seconds.
A virtual credit card is another tool in modern-day commerce. It’s an alternate credit card number that eliminates the need for a physical card — or even access to your real card number.
But why swap out your real credit card for a virtual one? Two main reasons: It can help safeguard your financial information and even save you money.
Security Benefits of a Virtual Credit Card
A virtual credit card is often used for security reasons. Virtual credit card providers, which include banks and standard credit card companies, generate a unique card number for you to use. When you make a purchase using your virtual card, the seller receives that fabricated card number rather than the digits on your real card.
While your virtual card is linked to your bank or credit card account, using that alternate credit card number makes it less likely that a data breach or fraudulent activity would impact your main account.
Money-Saving Benefits of a Virtual Credit Card
Virtual credit cards also help give consumers greater financial control. These card numbers typically have a short shelf-life — sometimes generated for a single use only. Some virtual credit card issuers allow consumers to select the card’s expiration date or spending limit. In other instances, consumers can restrict the card to a particular merchant.
If your virtual number is restricted to a one-time transaction, you could use it when signing up for a free trial without worrying about getting charged if you don’t cancel in time. Or if you cap your spending limit at $50, you can thwart a major online shopping binge.
Speaking of online shopping, It’s important to note that virtual credit cards can only be used for purchases online or over the phone. Physical cards aren’t issued. That means you won’t have one to, say, show at a rental car counter to verify a reservation.
How to Get a Virtual Credit Card
There are a few ways to get a virtual credit card, though it’s not a widespread service.
Two banking institutions that provide virtual credit cards are Capital One and Citi. Capital One’s virtual assistant service, Eno, provides customers with virtual credit card numbers via a browser extension when shopping online. Select Citi cards have a virtual account number feature that creates randomly generated account numbers.
Aside from these options, there are independent financial companies that issue virtual credit cards, such as Privacy and Divvy. The startup DoNotPay has a similar service that generates virtual credit card numbers to use for free trials — and it isn’t linked to your bank account at all.
Make sure the virtual credit card provider you use is safe. Check for statements that the company adheres to payment card industry data security standards or is PCI DSS compliant.
When considering using a virtual credit card, be aware that some companies charge fees — for creating a new card number, for each time you use the card or for maintaining your account. Companies like Divvy and Privacy, however, provide virtual credit cards for free. Instead, they make their money through interchange fees — the transaction fees merchants pay when customers make purchases with debit or credit cards.
Nicole Dow is a senior writer at The Penny Hoarder.