Young woman on couch at home shopping online

It seems as if not a month goes by that there isn’t news about another online data breach or that a company’s data vulnerability to hackers. Because of this, consumers are researching different options for protecting their personal information and finding more secure ways of shopping online. If you are thinking about using a virtual credit card for better protection, but aren’t sure what the pros and cons are, this guide will help you make the most informed decision possible.

What is a virtual credit card number?

A virtual credit card is a randomly generated set of numbers that are linked to your actual credit card account. It works just like a regular credit card but adds another layer of security when shopping online.

Here is how it works: you obtain a virtual credit card number directly from your bank or by linking a pre-existing card to an online service that works with your bank. Depending on the type of credit card you have, whether it is a Mastercard or Visa for example, you can use a virtual credit card service via an app. This app will create a new virtual credit card number for every single online transaction.

Every virtual credit card number is unique and can only be used once — think of it like a one-time use token. This token includes a unique credit card number and security code, just like a normal credit card account. It may also come with the option to choose an expiration date as well as a spending limit.

When you have done your online shopping and your cart is full, simply check out online or make an order over the phone, just like normal. The online merchant sees and processes a virtual credit card number the same way they would any other purchase. Your purchases are processed and show up on your monthly bank statements as usual. The entire process is pretty straightforward, but with one additional step that helps protect your personal information.

Perks of using a virtual credit card number

Here are some reasons why using a virtual credit card number can make sense when shopping online or over the phone.

  • Reduces the risk of identity theft and fraud: Most online retailers store a customer’s personal data and payment information for easy checkout. While this is convenient, it can create a problem if your account is hacked. Using a virtual number helps reduce the risk of identity theft or fraud since the online retailer never gets access to your actual credit card number.
  • Keeps your credit card account open: In today’s tech-driven world, data breaches are a regular part of online shopping. When this happens, you have to close your credit card account and get a new one. This can be quite a hassle if it is your main credit card account and have recurring payments attached to that number. However, in the event of an online data breach where you used a virtual credit card number, that virtual card can be closed instead, allowing your main credit card account to stay open.
  • Allows a spending limit: Your virtual credit card may also come with the option to set a spending limit for added control over your budget. Once this amount has been reached, no more purchases can be made using this credit card number. This feature can be useful to maintain control of your online spending or when sharing a credit card with a spouse or other family member.
  • Includes an expiration date: You can set your virtual credit card number to expire on a specific date. This will help ensure that purchases are only made within the timeframe you choose, giving you peace of mind over your spending. For example, if you use a virtual credit card number for a subscription purchase, it will only charge the account until the date of the expiration.
  • Speeds up online checkout: Entering your payment information during checkout over and over can be time-consuming. Thankfully, some banks have an app or extension that works with browsers like Chrome or Firefox to automatically populate your virtual credit card number during checkout. This makes it a more convenient and easier way to securely make purchases online without the hassle of entering your information each time.

Downsides of using a virtual credit card number

While using a virtual credit card number does come with some perks, there are a few downsides to note as well.

The most notable downside is that they only work online or over the phone. You can not use a virtual credit card for making in-person purchases or where you would swipe a physical card.

Refunds can also be problematic since a virtual credit card number is only for one-time use and usually comes with an expiration date. This could lead to your refund being issued as in-store credit.

Virtual credit card numbers can also give you more control over your money management, thanks to features like spending limits and expiration dates. If you want the flexibility of using a credit card online but with added protection and convenience, then a virtual credit card may be a smart option for you.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.