How Does a Virtual Credit Card Work?

What is a virtual credit card?

A virtual card serves as a disposable representative for your real credit or debit card. If something goes wrong with a virtual card, you can simply delete it and get a new one. Virtual account numbers (VANs) are primarily used for security and convenience. Instead of giving merchants your actual credit card detail, you can just give the virtual card number. Then, if the website or company has a security problem, you can easily cancel the card. You don’t have to worry about criminals carrying out fraudulent transactions because they would just have that one limited number. You also won’t have to report your card details as stolen and get a new card mailed.

Here’s a summary of just about everything you need to know about virtual credit cards:

  • Secure your financial details: If a hacker steals your virtual credit card, it will not compromise your actual account, enhancing your overall financial security.
  • Information is different: The account number, security code, and expiration date on your virtual card will normally be different than your actual card.
  • Only good for certain transactions: Can be used to make payments online or over the phone but cannot be used in stores.
  • Features vary: The features you get with virtual cards will depend on your card issuer.
  • Some are single-use only meaning a virtual number may be limited to a single transaction.
  • Virtual cards may be merchant-specific: A particular virtual number may be limited to transactions with a single merchant.
  • Set personal spending limits: You can often set individual spending limits for each virtual card you create.
  • Purchases show up as normal: Any purchases or transactions you make will show up in your account as they normally would but will be tagged with the virtual number.
  • Returns shouldn’t be a hassle: Card issuers say that virtual card numbers shouldn’t cause problems when returning purchases made with them.

When Should You Use Virtual Credit Card Numbers?

How secure do you feel when shopping online? Are you willing to give your real account details to any website you might make a purchase from? Do you want to be able to set limits on automatic withdrawal transactions?

Your answers probably depend on your temperament and where you tend to shop. Even if you only make purchases from big, popular retailers, data breaches are still a threat. When it comes to smaller companies with questionable websites it’s normal to feel skeptical about the security of your private data. Additionally, virtual credit cards may be a good option when not intending to keep a subscription past a specific date. 

Here are some situations in which you might want to use a virtual credit card, for security or otherwise:

  • Online shopping: You may want to use disposable credit cards for all your online purchases, just to be safe or for convenience.
  • Subscription services: Don’t want to subscribe to a subscription past that one-month free trial? Pay with a virtual card that will expire by then, and you won’t be charged past that date.
  • Potentially risky websites: It might be easiest to only use virtual cards for websites or companies that seem shady, or with new businesses.
  • You’re worried about data breaches: Data breaches are all too common. But if hackers steal your virtual card number, you can just sigh in relief as you create a new one.
  • Give your employees a spending method: As a business, you can give purchasing power to employees without handing over your actual card number or a company card.

Virtual Credit Cards Can Be a Beneficial Tool, When Used Correctly

Consider using a virtual number if you’re making a payment to a potentially risky website. Or, if you want to take extra steps to maintain your privacy you can use virtual numbers for all of your online shopping. Lastly, businesses should consider using a virtual credit card like the NachoNacho card which is an efficient and easy way to manage Saas subscriptions; set spending and time limits specific to each card to individually manage subscriptions, assign virtual cards for employee use, and cancel or pause cards with the click of a button.

So stay smart — and shop safe!