New advances in technology allowed financial institutions to upgrade the services they offer. Now, credit card providers provide virtual credit cards to promote safe, contactless payments. They are essential, especially amid the COVID-19 pandemic. Read on to know more about virtual cards and how they can make your financial transactions more convenient.
You can store a “virtual card” on your phone and use them for contactless payment transactions. The card has its expiry date, card number, and CVC.
Meanwhile, a “digital card” is a digital copy of your physical bank card you can save on your phone. They have the same card number, expiry date, and CVC as your actual bank card. You can use digital cards with Apple Pay or Google Pay.
A “disposable card” is a virtual card that you can only use once. These are much like conventional credit cards. The main difference is that credit card providers do not issue a physical card.
Today, financial institutions offer prepaid credit cards with different numbers than your original credit cards.
You have the option to top up your money from your base account using the card. These cards have expiration dates and will be unusable after the deadline. You can use several disposable cards only once.
Card issuers can offer virtual cards as a complimentary service for customers who want to pay online but want an extra layer of security.
This article outlines the three common types of virtual cards: single-use cards, lodge cards, virtual debit cards, and virtual credit cards.
Single-Use Card
Single-use credit cards, also known as virtual or disposable credit cards, serve as alias credit card numbers for actual credit cards. Financial institutions offer the card to customers to make online shopping safer.
Cardholders do not have to provide their actual account number to a merchant with a single-use credit card. For example, they can use a single-use credit card to pay the following expenses:
Each vendor will see a different set of account numbers, but they will be from the same base account.
A lodge card is a centralized payment solution that organizations use to manage company travel expenses. Employees can use the card to cover the costs typically exclusive to airfare or rail fare.
It is a card lodged within a network of travel agencies. The card transforms various travel expenses into a single payment to the corporate customer.
Today, many financial institutions and corporate travel providers offer lodge card accounts. These accounts provide:
A lodge card allows you to spend money with travel providers, travel agencies, suppliers, and self-booking tools.
Today, many financial companies offer digital corporate credit cards for businesses. Employees can use these cards to pay for expenses during business travels. Unlike lodge cards, corporate credit cards also cover costs other than airfare or rail fare.
A virtual debit card is a virtual card that has all your debit card information without the plastic card. The virtual debit card has your debit card number, expiration date, and CVV code.
You can make transactions online or over the phone with a virtual debit card until you activate your actual debit card. The virtual debit card is only active a certain number of days after opening your account. The number of days can change depending on your preferred financial company.
Virtual credit cards function like a layer of protection between your base credit account and vendors. The cards pass any completed and authorized transactions directly onto your funding source.
These cards serve as a buffer when a breach or overcharging happens to merchants. They are helpful for popular websites where you have recurring payments.
You do not have to change your actual credit card information if your virtual card details are compromised.
Today, several fintech firms provide virtual credit cards. Acquiring a virtual card can even be handled online, which means you do not have to fill out paper documents or go to a physical location in person.
You can use a virtual card as a physical bank card. Aside from using it for online purchases, you can use the card for contactless payments in stores.
You can add your virtual credit card to Apple Pay or Google Pay for faster and more convenient transactions.
Virtual and physical cards serve the same purpose of facilitating payments, but these solutions have a wide range of foundational and functional differences.
Fintech firms designed virtual cards to protect customers against theft and fraud. Meanwhile, physical cards are vulnerable to these dangers.
With virtual cards, your credit card number remains private even if you use it to pay for various online transactions with several merchants.
Unlike physical cards, virtual cards protect sensitive information card users typically share with multiple vendors.
It is important to note that virtual cards are not 100 per cent secure. But, in case of a data breach, the threat is confined to a specific card. This feature allows you to handle the threat faster and cancel the card quickly.
Digital cards can help firms save time and enhance efficiency.
Corporate credit cards enable employees to request and receive funds fast. They also allow employers to enforce spending policies easier.
In contrast, physical cards do not have these capabilities. Without virtual corporate credit cards, companies must undergo tedious bureaucratic tasks, wasting valuable time and hindering fast-paced events.
Organizations can enjoy streamlined reconciliation and audit processes with designated cards for each vendor, team member, or subscription.
Most companies opt for white-label cards because they allow companies to implement their unique designs, logos, and colours onto their cards. Virtual cards can be fully white-labelled, which means firms can customize them to feature any of their signature symbols, important information, or colour schemes.
On the other hand, physical cards allow co-branding, which lets businesses feature their brand on the card while sharing the space with other organizations. Although co-branding can promote positive brand association, it usually involves complicated legal agreements and profit-sharing.
Setting up a virtual card is different from getting a physical card. You can set it up instantly since virtual cards are digital. You can even complete this step through your bank’s mobile app in only a matter of minutes.
Meanwhile, physical cards can be much more tedious due to their material elements. Companies need to pay for their cards to be printed and delivered, making the process so expensive.
You can use both virtual and physical cards for business or personal spending. But the cards differ on how and where you can use them.
You can use virtual cards for a wide range of tasks, including subscription management, electronic spending, and one-time purchases. A virtual card can protect your account from data breaches and fraud.
Meanwhile, you can use physical cards for in-person spending and online transactions. That said, using a physical card for online payments can be a lengthy process – not to mention that it poses security risks.
You use the same number sequence with every transaction when using your physical card online. This point makes it easy for hackers to infiltrate your account.
Control is vital in effective financial management. Some financial institutions provide physical cards with credit limit settings. For example, prepaid cards are debit cards preloaded with a certain amount of money, but they are not linked to any bank account.
These cards offer limited options and none of the added layers of security that virtual cards offer.
By getting virtual corporate cards, firms can manage their non-payroll expenses better. The cards reduce the risk of discrepancies, overspending, and costly auto-renewals. It is also easy to set limits on virtual expenses, expiration dates, and usage.
Although using a virtual card has advantages over using a physical card, it still has disadvantages. Here are the pros and cons of using virtual cards.
Although using a virtual card has advantages over using a physical card, it still has disadvantages. Here are the pros and cons of using virtual cards.
Delayed transfer of funds. Virtual cards can delay funds transfer from the online buyer’s account to the merchant account. While this is not always the case, a few instances where the buyer receives the product first before the merchant receives payment is worth mentioning.
Not all merchants accept them. Another disadvantage of using virtual cards is that some merchants are still sceptical and do not accept virtual cards.
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How Do You Use A Virtual Card? Things to Consider When Getting a Virtual Card |
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| Tip 1 | Remain vigilant even if you are using a virtual credit card. Check your financial statements regularly to know if there are any unauthorized transactions. | |
| Tip 2 | You could face complications when using virtual credit cards for transactions that need verification at a later stage. If you need to perform this transaction, use a physical card or pay with cash instead. | |
| Tip 3 | Returning items you bought using a virtual card can be a complicated process. To avoid this issue, pay using a physical card to receive monetary reimbursement. | |
Using virtual credit cards can be a safe way to purchase from multiple vendors. Using digital cards also has several advantages over using traditional credit cards. These advantages include more control, more convenient transactions, and a higher level of safety.
However, using virtual cards also comes with disadvantages. Returning items can be a more complicated process if you use virtual cards.
It would help to regularly check your financial statements even when using the cards to ensure no unauthorized transactions.
If you want to set up a virtual card for your organization, Spenmo has the solution for you. With Spenmo, you can have instant access to physical and virtual cards. We can make it easy for you to manage all your payment processes.
The Singapore government has set a new parameter for SMEs. You may check it with the Ministry of Trade and Industry.
An SME has an annual operating revenue below S$100 million or less than 200 employees.
Some popular examples in Singapore are Honestbee, Datarama, and Mighty Bear Games.