Are virtual credit cards safe? A guide to virtual credit card safety

What are virtual credit cards?

Virtual credit cards are digital credit cards connected to the same account as an equivalent physical credit card. However, they have a distinct number, CVV, and expiration date from the physical card. They offer a secure payment alternative for users who are waiting for a new card to be issued or want to protect their financial details from potential threats.

Most virtual cards are flexible. Your virtual credit card provider may let you set up multiple cards under a single service and set custom spending limits for each of them based on the amount spent or the number of transactions made. For instance, you can set up one virtual card for subscription services and limit the monthly spending amount to the exact cost of those services. Then, you can create a separate virtual card with a higher monthly spending limit for other online transactions. A temporary virtual card can be set up to automatically deactivate once the spending or usage limit is reached.

How do virtual credit cards work?

Virtual credit cards are issued by your bank or credit provider upon request. Once you receive a virtual card, you can customize its name and usage limits. Typically, limits are set per month or per year. If you need the card for only one purchase, you can set it up to be single use.

When the card is ready, you can add its number, CVV, and expiration date to a digital wallet like Google Pay or Apple Pay. This will allow you to use the card for some contactless payments. You may need to connect the virtual credit card account to your debit account to manage funds.

When you make a purchase or a transaction, enter the virtual card details as you would normally. If the amount required for the transaction is above the set spending limits, you won’t be able to complete it. If you have a single-use card, it will automatically close after the payment is confirmed. You can use the app provided by your credit card company to track your spending and adjust the limits.

Benefits of virtual credit cards

Virtual credit cards offer a convenient and flexible way to securely pay for services online, granting users better control over their spending.

• Security for credit card details. When you generate a virtual card, its information, aside from your name, is completely different from your physical card. This helps protect you from financial identity theft.
• More control over spending. Many people worry about going overdrawn on their credit cards. A virtual card lets you select how much money you can spend per purchase or per month, ensuring you stay within a comfortable limit.
• Ability to create multiple cards. A virtual credit card can help you manage your payments more easily. You can set up individual cards for recurring subscriptions, special purchases, utilities, and other needs.
• Single-payment option. One of the adjustments you can add is a single-use card. You can take it out for a single purchase and, once it’s done, the virtual card will be discontinued automatically.
• Flexible card management. You can take out new cards and close existing ones at your convenience. For instance, if you suspect one of your virtual credit cards was compromised, you can simply close it and open a new one with a different credit card number.
• Protection against scams. You can set a maximum spending limit on a virtual card. That way, even if you accidentally purchase something from a fraudulent website, your funds can be protected from online shopping scams.

Drawbacks of virtual credit cards

Despite their flexibility, virtual credit cards run into some barriers that can restrict users’ ability to pay for some services.

• Technological dependency. Unlike physical cards that use RFID, virtual cards rely on NFC technology to work. Older phones don’t have NFC support, which can restrict some users from accessing this credit card option.
• Limited availability. Not all traditional credit cards have a virtual alternative, limiting users to physical cards. This service is also only available in some countries, which can restrict cardholders who plan to travel or live abroad.
• Issues with in-store purchases. Some physical stores may not support payments via virtual cards, forcing customers to use other payment methods.
• Management struggles. Having multiple cards for different purposes can seem convenient at first, but it can create problems trying to manage each one. If you accidentally cancel the wrong card, it can’t be restored, which could cause issues with recurring payments.

Virtual credit card safety

As a relatively novel payment method, the safety of virtual cards is a pressing matter. While some users see it as a more flexible alternative to regular cards for faster online purchases and financial management, others might be concerned about whether this type of online banking is safe and whether using virtual credit cards could endanger their online safety.

Are virtual credit cards safe?

Yes, virtual credit cards are a safe way to conduct online payments, do personal and business transactions, or manage subscriptions. Creating a virtual credit card generates unique card details separate from your physical credit card account number, protecting your account information from credit card fraud and breaches that could compromise your data safety.

Are virtual cards safer than physical cards?

Yes, virtual cards can be considered safer than physical cards. They’re easy to open and cancel, letting you quickly protect your data against online scams. Even if you accidentally pay for a fraudulent service or expose your details while shopping online, you can simply close the card you used with minimal damage.

Closing and opening cards for different purposes limits exposure of your physical credit information and lets you manage transactions more flexibly. The customization helps users avoid overdraft fees by limiting how much they can spend on one card.

What are the security risks of virtual credit cards?

Although virtual credit cards are considered secure, they still carry some risks that could endanger user data.

• Social engineering attacks. Credit card information theft is the goal of many types of phishing attacks. Cybercriminals can send spoofed emails linking to phishing websites designed to look like legitimate e-commerce platforms. Fake customer support agents call asking for your credit card information to “handle an unprocessed payment.” These strategies can trick you into giving up your financial information, like access to your physical or virtual credit card accounts.
• Hacking. Cybercriminals can also attempt to directly compromise your virtual card and conduct unauthorized transactions. They may use stolen login credentials to access the apps you use to manage the cards.
• Unreliable service providers. With this service becoming increasingly popular, not every virtual credit card issuer may be legitimate. Some scammers may create false vendors that pretend to offer legitimate credit card services. However, these fail to adhere to KYC (know your customer) policies and instead are used to steal financial account information.
• Mishandling of funds. If criminals were to gain access to your virtual card, they may use your financial information for fraudulent transactions or illicit purchases.

How to use a virtual credit card safely

If you switch to a digital credit card for simpler online shopping or to protect your physical payment information, you should keep a few extra security practices in mind to avoid falling for scams.

• Only open virtual cards with reputable issuers. Always ensure you’re signing up for a virtual card from an official vendor. Not all credit card companies offer digital cards, so check their available services before you sign up.
• Double-check e-commerce websites. Even if you use a disposable virtual card number, be mindful of which online shopping websites you use. Always ensure the shops you visit are legitimate before you provide them with your credit card number. Even if you close the account, other information, like your full name and home address, can be compromised.
• Use a secure connection. Only access online retailers if your connection is secured. If you use open networks in public spaces like cafes, consider switching on a virtual private network (VPN) to encrypt your traffic and prevent cybercriminals from intercepting it.
• Set up multi-factor authentication (MFA). To ensure secure transactions and protect your financial accounts, always use multi-factor authentication or two-factor authentication. You can use an authentication app on your mobile device to easily verify your login attempts and securely access your virtual cards.
• Monitor your transaction activity. Keep an eye out for unauthorized or unfamiliar credit card activity. If you spot something suspicious, get in touch with your credit card company and close the affected virtual card.
• Close or freeze virtual cards you’re not using. If you have multiple virtual cards taken out, but some are just lying dormant, consider closing them. That way, if their details appear in a data breach, cybercriminals won’t be able to utilize them.
• Sign up for credit monitoring. Having multiple credit cards that you use on different platforms can increase your fraud risk. Get a credit monitoring service like NordProtect to keep track of any activity related to your credit file.
• Set up security alerts. Stay aware of data breaches or unauthorized attempts to access your credit. With NordProtect, you can receive security alerts and notifications whenever suspicious credit activity occurs.