What is a virtual credit card?

As the name suggests, a virtual credit card is a digital entity that adds an extra layer of security to online purchases. Virtual credit cards allow you to make transactions without having to disclose your number and address. So, there’s generally less risk of your details falling into the wrong hands.

How do virtual credit cards work?

Virtual cards work like physical credit cards but have a single-purpose virtual card number provided for each situation. That number allows the cardholder to restrict their use to a single transaction within a limited date range and dollar value or to a particular vendor.

Virtual cards consist of a randomly generated credit card number tied to an existing payment account. They use a limited-use code linked to your existing credit card and can only be used online or over the phone for a one-off purchase or multiple transactions. If your credit card provider offers this feature, you can request a one-off virtual number.

Similar to physical credit cards, virtual cards contain a 15- or 16-digit number, expiry date and CVV (card verification value).

Virtual cards can also be added to smartphone digital wallets for transactions via Apple Pay, Google Pay or Samsung Pay. You can also link a virtual card to PayPal and other popular platforms, such as Netflix, Apple Music and Spotify. However, not all platforms accept virtual card numbers, so it’s always a good idea to check if you want to use this method for payment.

» MORE: How do I pay with my phone?

Types of virtual cards

While you can describe any card stored virtually or on an app as a virtual credit card, there are three main types of virtual cards in Australia:

Instant virtual credit cards
Virtual debit and gift cards
Virtual business and corporate cards

Instant virtual credit cards

Unlike virtual cards generated for one-off payments, an instant virtual card is a digital version of your physical card. You can use once approved before the physical version arrives in the mail.

Your credit card provider will issue you a digital copy of the card number, expiry date and CVV. You can use these details for online and over-the-phone purchases, the same as you would with your physical credit card.

Virtual debit and gift cards

Virtual debit cards are popular with those who frequently travel overseas or shop online in multiple currencies and want to make international purchases without incurring hefty foreign exchange transaction fees.

Both virtual debit cards and virtual gift cards function like virtual credit cards in mobile wallets. While they may link to a physical card from a particular provider, the details differ in a smartphone wallet environment.

Virtual debit and gift cards can be used via a smartphone or in person, where contactless payments are permitted.

Virtual debit card providers in Australia include:

Wise
P&N Bank
Revolut
Airwallex.

» MORE: What is a travel money card?

Virtual business and corporate cards

Business and corporate credit cards are designed to help companies manage their finances without having to issue many physical business credit cards to their employees.

Like consumer virtual credit cards, some business cards and corporate credit cards, such as expense management cards, use virtual card numbers for single-use or ongoing payments. Businesses can also restrict their function to specific types of payments.

» MORE: When are business credit cards worth it?

How to get a virtual card

Virtual credit card services for consumers are still fairly limited in Australia, although they are becoming increasingly more common. Some current providers include:

Bankwest
Bendigo Bank
Latitude Financial Services
MoneyMe.

Other banks, such as the Commonwealth Bank, offer virtual card services only for corporates. Westpac’s Virtual Card is also heavily geared towards businesses, such as paying suppliers and making travel arrangements.

How to use a virtual credit card

The easiest way to use a virtual credit card number in Australia is to add your existing credit card to a mobile or digital wallet. Apple Pay, Google Pay and Samsung Pay all provide some form of virtual credit card. Once you’ve added your card, the wallet will create a virtual copy. You can then use it to pay for something from the app or at physical stores that accept contactless payments.

From a security perspective, the beauty of this is that a smartphone wallet will be prompted to create a virtual account number instead of using the numbers printed on your plastic credit card. That way, it’s harder for thieves to steal your credit card information. Once your card is in the app, it will generate new numbers each time you use that mobile wallet.

Is a virtual credit card worth it?

Virtual card numbers protect your details and secure your data. Much like a VPN, virtual cards shield your information for increased privacy, and there’s no shortage of occasions where their practical application is clear.

If, for example, you are using a particular website or vendor for the first time and you have any concerns, a virtual number should provide you with a layer of insulation from your physical details falling into the wrong hands. You can then use that virtual number again if there are no issues or close the card after a single transaction. Companies store your information when you transact with a physical card, which means you trust their data security protocols. With a virtual card, however, there is no risk of this information getting passed on to would-be criminals and credit card scammers. The fewer data you disclose, the smaller your digital footprint becomes, which means the more secure you are from fraud.

Additionally, virtual card numbers cannot be traced back to your original physical credit card. So, you can always cancel your card whenever you feel compromised without closing your physical account.

Virtual card numbers are also relatively easy to obtain and involve far less rigmarole than applying for a physical card.

On the downside, they are of little use if you need a physical card to offer proof of identification or if you want to request a chargeback or refund and the vendor wants your card information, including your address. Additionally, if the number you used for a transaction no longer exists, this can lead to complications.