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Finance

What Are Virtual Credit Cards and Why Are They So Popular?

A virtual credit card is similar to a physical credit card, except that it is available only online and offers a safe and simple way of spending money. It enables business owners and individuals to spend money using their mobile phones and the internet instead of a physical card. It has been gaining tremendous popularity among financial service companies wanting to gain traction in the industry. 

Much of virtual credit card’s stems from the fact that they have many innovative features that ensure a safe, convenient, and controlled spending experience for users. It is a useful financial tool for all categories of customers – small business owners, fintech startups, and finance executives. 

If you do not know about credit cards that are available virtually, keep reading to make an informed decision while purchasing one for yourself. 

How does it work?

The process of making a purchase transaction at an online PoS terminal is similar to that of your physical credit card. When you get to the ‘checkout’ stage of online payment, you are required to enter your virtual credit card’s information instead of your company’s card details. 

A virtual credit card helps in the following ways: 

  • Help in managing company subscriptions. 
  • Cover expenses related to business travels, such as hotel stays, train tickets, plane tickets, etc. 
  • Facilitate occasional expenditure – office supplies, event participation fees, etc.

A virtual credit card makes the online payment process easy and quick without compromising your sensitive data’s security. Unlike your credit card, your virtual card is not subject to storage and misuse by hackers. It provides online retailers with dynamic information, which changes every time the data is verified while making payments. 

Types of virtual credit cards

There are two types of virtual credit cards – single-use virtual cards and lodge virtual credit cards. They offer a high level of security, control, and efficiency when processing payments. 

  • Single-use virtual credit card

As the name suggests, it is a virtual card that comes with a number valid for once. After making the payment through your single-use card, the card number becomes invalid. The best thing about it is that you have the luxury of controlling the expiration date, the merchants allowed to be used with it, and the credit limit. 

You can use the single-use virtual card for one specific amount or for different purchase transactions that add up the specific amount. For instance, you can use your credit card for Rs. 10000/- or you can use two transactions of Rs. 5000/-. It enables you to process payments quicker than a traditional credit card.

  • Lodge virtual credit cards 

It comes with an established credit limit for goods, services, or invoice payments. It is provided to vendors with an already established credit limit. Therefore, transactions beyond the credit limit are never processed. However, the identification numbers can be used multiple times. 

With a lodge card, you can set controls for expiration dates, etc. Since you will have to use the same virtual card number in different transactions, you will have to ensure that your chosen vendors are credible and can be trusted. 

Advantages of virtual credit cards 

A virtual credit card comes with numerous benefits that you cannot get with a traditional credit card. It enables business owners to manage their finances, optimize spending, and protect the funds.

  • Convenience

A virtual credit card’s popularity can be attributed to its ease of use and convenience features. It enables users to make quick and easy online payments. All you need is a mobile phone or computer with the availability of internet. Besides that, it eliminates the hassle of finding a misplaced debit card. 

As a business owner, you can have the experience of easy and convenient shopping for your business while protecting your sensitive information. 

  • Protection against fraud

Although both physical and virtual credit cards are linked to your credit card account, virtual credit cards limit the amount shared while making a purchase. Hence, it protects your PII – personally identifiable information. It tokenizes your date, encrypts the account number, and creates a random sequence.  Only you can use it to make one-time payments. 

Unlike your physical credit card, it does not contain magnetic stips and visible card numbers. It makes it impossible for unauthorized persons to infiltrate your account by making unauthorized transactions. Your virtual credit card may ask for a PIN or face scan before giving you access to your account. You can easily freeze your account if your card gets compromised. 

  • Spending controls

Another perk of a virtual credit card is that you can set spending limits and choose which merchants to pay to while using it. It enables you to ensure that your employees use company funds judiciously. It is a great way to protect yourself against hackers.  Also, you can schedule a date to automatically close your account after one payment. 

  • Subscription management

Another great thing about credit cards that functioned virtually is that it enables business owners to manage their company’s subscriptions. For instance, after setting up your card for each subscription, you have the power to ensure that your merchant does not overcharge you. Furthermore, it allows you to cancel your virtual credit card without changing your payment information for each vendor.

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