What is a virtual credit card?
A virtual credit card is a digital version of a physical credit card issued by banks and other lenders. Unlike a traditional card, a virtual credit card provides a unique 16-digit card number, expiration date and CVV code, making it a highly secure method of transaction. Besides enhanced security, a virtual credit card offers a convenient alternative to paying with a physical card.
The term ‘virtual credit card’ can refer to:
- A physical credit card that comes with a virtual version accessible through the provider’s app or a virtual wallet such as Apple Wallet or Samsung Wallet
- A credit card that exists only in a digital wallet, such as Wizit (Mastercard)
How does a virtual credit card work?
A virtual credit works exactly like your physical credit card but is stored in your digital wallet (e.g. Apple Pay, Google Pay, Samsung Pay) on your phone instead of your physical wallet. When you add a credit card to your digital wallet, it creates a virtual copy of your credit card that you can use to make payments from the app. You will need to have an active internet connection to add a card to your digital wallet.
You can use a virtual credit card online by selecting your digital wallet as a payment option and in brick-and-mortar stores when you hold your phone over a near-field communication (NFC) card reader or EFTPOS terminal, such as Square. When you tap to pay at checkout, you'll see your virtual credit card without the numbers pop up on your phone screen, along with encrypted details of your virtual account number.
Virtual credit cards in Australia were initially introduced for business and corporate use to give businesses a way to manage funds without issuing multiple physical credit cards to employees (minimising the risk of loss or theft and simplifying expense tracking). They’re now widely used by everyday consumers.
Virtual credit card vs standard credit card
Virtual credit card
- Exists only in a digital wallet
- Some virtual credit cards have temporary or one-time-use numbers, making them more secure for single transactions
- Your financial data isn’t shared with the merchant (and won’t appear on the receipt)
- Virtual credit cards may not be accepted everywhere
Standard credit card
- A physical card that you carry in your wallet
- Includes EMV chips and CVV codes, but can be susceptible to physical theft or loss
- Your financial data is captured by the point-of-sale system for authentication
- Most merchants accept physical credit cards
How do you get a virtual credit card?
Some lenders, such as Bendigo Bank, MoneyMe and Westpac, offer virtual credit cards through their online banking platforms, mobile apps or via a digital wallet. You can apply for a virtual credit card the same way you’d apply for a normal credit card. The benefit here is that once you’re approved, you can start using the card immediately as opposed to waiting for it in the mail.
For example, MoneyMe’s Freestyle Credit Card only takes minutes to apply online. Once approved, you can log into the MoneyMe app and start using the card details for purchases straight away.
Virtual credit card pros & cons
Pros
- Instant access, most virtual cards can be used as soon as your application is approved
- Virtual card apps and digital wallets encrypt your personal and financial information, reducing the risk of data theft
- More environmentally-friendly with zero plastic use
- Useful for businesses to control and track expenses without issuing multiple physical cards to employees
Cons
- Not all merchants accept virtual credit cards
- Relies on digital devices and internet connectivity, which may be difficult if devices are lost or internet access is unavailable
- When travelling, particularly in hotels, virtual credit cards may not be accepted because they often require a physical credit card for incidentals like potential damages or theft charges
- Processing refunds or returns can sometimes be more complicated compared to physical cards
