A virtual credit card is a tool which can help consumers guard againt online fraud and protect their personal information in the event of a data breach.
A virtual credit card is not a physical card but rather a unique randomly-generated number that is associated with your credit card account. Using a virtual credit card enables you to make transactions on your credit card account without ever exposing your real card number. So it acts as an extra layer of protection in case the merchant system gets hacked.
The virtual card can be used to make transactions online or over the phone; they are usually not for in-person purchases. Typically, the number can only be used once.
In some cases, cardholders can set up a maximum spend on the virtual card which helps protect them from being overcharged in an online or phone transaction.
If thieves get their hands on a virtual credit card number, it does them no good. They cannot trace the virtual card number back to the original account. Additionally, since it usually can only be used for a single purchase, hackers cannot steal the number and then use it for own fraudulent transactions.
Only three major card issuers offer virtual cards at this time: Capital One, Citi and American Express.
Capital One’s program is an online assistant, Eno, which is a browser extension. To create a virtual credit card, cardholders install the Eno extension and then proceed to shop at online retailers. When checking out, the customer will simply click the browser extension button and a virtual credit card will be created that can be used for that transaction. The virtual account numbers can be managed through Capital One’s website.
Like Capital One, Citi allows users to generate random Citi virtual account numbers through a web-based tool or a program that can be downloaded to a PC. Cardholders can also set spending limits and expiration dates. The Citi virtual account numbers can only be used for mobile, online and mail order transactions.
Amex AXP offers virtual credit cards on some of their corporate card programs. A corporate cardholder creates a user profile and virtual card for the company in the American Express Go portal for their employees. Virtual cards can then be distributed to the company’s employees through the Amex Go mobile app. The virtual cards can be used immediately for online transactions or stored in a mobile wallet. All purchases made for the company by the virtual cards are consolidated onto one bill.
Bank of America used to offer virtual credit cards but suspended the service in September 2019 when the bank felt their security alerts and fraud tools were adequate in protecting their cardholders. Their program was called ShopSafe. When it was in effect, ShopSafe generated a virtual card number for each online merchant. Cardholders could then set the spending limit for that merchant as well as the period of time the virtual card could be used. ShopSafe would display the virtual numbers, transaction histories for each number and the remaining balance for each account.
Are There Drawbacks?
Virtual account numbers can help protect cardholders from credit card fraud, but they do come with some limitations.
If you purchase something from an online retailer and need to return it to a physical location, you may run into trouble because the cashier will likely need to see the card with which the items were purchased. Since you do not have a physical card, you may receive a store credit or gift card.
Since virtual cards are only valid for a certain time period, they cannot be used for subscriptions as they will expire and your transaction will be declined.