Here’s How Virtual Credit Cards Can Protect You When Shopping Online

If you’ve ever had your credit card or debit card details compromised you’ll be well aware of what a hassle it can be. Virtual credit and debit cards can help you avoid financial headaches and your accounts getting locked down by hiding your real card number.

Before we dive in, it’s important to note that we’re not giving specific financial advice or specifically endorsing any particular virtual credit card product. We’re instead explaining how virtual cards work as a privacy and security tool while shopping online, and highlighting some of the best know platforms for virtual credit and debit cards.

How Do Virtual Credit Cards Work?

A virtual card works just like a standard bank or credit card, except it has no physical counterpart. These cards are designed with online shopping in mind, and depending on the service you’re using you can generate multiple (sometimes unlimited) cards for all kinds of purposes. Think of them as the credit card equivalent of a burner phone or an email alias service. You create the card numbers for a purpose, keeping them for as long or as little as you need them.

This gives you a large amount of control over payments online. For example, you can lock cards to retailers so that they can only be used at one online store. You can impose spending limits so that you don’t run into an issue where that too-good-to-be-true monthly subscription price suddenly skyrockets. You can freeze or rescind these cards at any point to stop further payments from being made.

You should be able to manage your virtual cards from a website or mobile app, making it easy to control your spending. Ironically, you will have to link your “real” payment information to your virtual card provider of choice (though some financial institutions provide a service that’s directly linked to your account).

Charges on your debit card immediately affect your available balance, which means the money disappears immediately. Credit cards are useful for claiming cashback, adding protections like insurance, or earning rewards like air miles, but they can cost you dearly if you don’t manage your balance carefully.

Most of us shop online using the same handful of payment cards. These details are shared between the different services and retailers we frequent. You probably have the same couple of cards linked to your Spotify, Netflix, Amazon, and Apple or Google account. These are likely the same cards you use to pay for fuel, electricity, groceries, and other crucial “real-world” expenses.

There’s a good chance that you or someone you know has had their card information compromised at some point. Though there are plenty of opportunities for fraudsters to target you in the real-world, many of these schemes take place online. Website security is better than it once was, but not all retailers use the best practices when it comes to security, and sometimes it’s just plain old user error like when people accidentally visit a fraudulent site instead of the real site they meant to put their payment data in.

Using a virtual card that is either locked to a particular merchant, designed for a single transaction, or one that you can freeze at any time can help protect your “real” credit card information. If the unthinkable happens and a dodgy online retailer puts your details at risk, the amount of damage they can do is limited.

This also works in reverse, since card skimmers can put your physical card out of action just as easily. The process of getting your account back in working order can cause havoc with your virtual life, since your payment details will need to be updated everywhere you shop. A virtual card can reduce the amount of administrative work you have to do or keep your accounts paid while you wait for your bank to deliver a new card.

Virtual cards can also help you avoid nasty surprises, like a subscription you have forgotten about. Simply cancel the card (or freeze it), and the monthly charge will fail. You’ll lose access to whatever service it is you’ve forgotten about (or that gave you a nasty rate hike), but you won’t lose any money. The same is true of “free trials” that demand your credit card information. That’s certainly better than having to send your credit card company after the merchant or even cancel the card if you can’t get the payments to stop.

Payment limits can help avoid cost blowouts, especially handy in the event that your account is compromised. If you only ever make small purchases from your Amazon account, imposing a $100 limit on your virtual card will stop a would-be thief from ordering thousands of dollars worth of electronics equipment to an address you don’t recognize. You can also set payment limits to prevent a retailer or service provider from charging you more over time by setting a limit just above the purchase or subscription price.

Virtual cards can even be helpful if you struggle with self-control. Perhaps you want a safeguard to help reign in your spending. Impose a payment limit on a card so that transactions will fail when you hit that limit, reminding you that you might want to wait a bit longer before completing the purchase.

Virtual Cards May Also Have a Few Drawbacks

Generally speaking, more control over payments and security is a good thing, but there are a few potential drawbacks you should probably be aware of. There are stories online about retailers canceling orders or pausing subscriptions due to the use of virtual cards, usually due to fraud being associated with such payment methods.

Many international merchants don’t recognize these services either, so you might find that you’re limited to using them with retailers inside the US. This is highly-dependent on the service you use, since virtual cards are a mainstay of many so-called borderless “neobank” financial institutions.

Depending on the service you use, you may encounter some hidden and not-so-hidden costs. This is often a percentage of the card value, a flat fee per card, and sometimes both. This doesn’t necessarily mean virtual cards aren’t worth it, but there’s a price associated with having a bit more control and peace of mind.

If you find yourself using these cards frequently, some vendors offer flat-rate accounts that waive card creation and percentage-based fees.

Which Companies Offer Virtual Credit Cards?

Many virtual cards are aimed at businesses and corporate customers that want to create and manage company credit cards quickly. Fortunately, there are a good number of services geared toward personal use too.

Privacy.com is probably the most well-known, both because virtual cards are the company’s main product and because it’s been around since 2014. The basic “Personal” account is free and offers 12 new cards a month, with merchant-locked and single use cards available. You can set spend limits on your cards, pause transactions, and rescind cards using mobile apps and the web interface. Privacy.com makes its money from “the fee that the merchant pays for accepting a debit or credit card.” Upgrade to Pro for $10/month to get 36 new cards each month.

IronVest is an alternative service that offers a range of services aimed at online privacy. This includes masked email, virtual phone numbers, and virtual cards. You’ll need to subscribe to IronVest Plus at $5.95/month to get access to virtual cards, though you get 35 per month. IronVest also charges $2 per card and an additional 1.5% on the total value of cards greater than $100.

Revolut is a financial platform that also allows you to create single-use cards, though there’s a lot more to it than that. It’s a “neobank” that can replace your standard brick-and-mortar bank that emphasizes financial convenience, cashback offers, fee-free international ATM usage, and more. Revolut’s standard plan promises “Unlimited disposable virtual cards” or upgrade to Premium for $9.99/month to get more protections on purchases including theft and accident protections.

Wise is a similar service to Revolut, offering an international account that is designed to facilitate the movement of money around the world. The service allows you to generate digital cards that you can freeze as you need.

Finally, you may wish to contact one or more of the companies you currently have a traditional credit card with and see if they offer in-house virtual card numbers. It was somewhat common for credit card companies to offer virtual cards in the past, especially when online shopping first became popular, but these days it’s relatively rare to find in-house virtual card services. Still, it certainly doesn’t hurt to check.

Alternatively, Use a Credit Card

Speaking of traditional credit cards, if you’re not interested in using a virtual credit or debit card, then it’s wise to use a credit card instead of a debit card for your online purchases. Credit cards usually offer another layer of protection when shopping online since most offer additional protections that debit cards lack. As far as headaches go, dealing with unauthorized charges on your credit card is relatively minor compared to unauthorized charges on your debit card. Additionally, you might also want to remove credit cards from Amazon or Google Pay and other accounts you aren’t actively using. The fewer places you expose your credit card number online (and the more often you remove your credit card data from services you aren’t actively using) the lower your overall all risk.