What is a virtual credit card?

Personal Finance Writer · 2 September 2021
As more of our money goes digital, plastic cards could be on the way out. It’s early days yet, but already we’re seeing more lenders offer virtual credit cards.

This article covers:

  • How do virtual credit cards work?
  • What are the advantages of a virtual credit card?
  • Are virtual credit cards available in Australia?
  • Which banks offer virtual credit cards to consumers?
  • What are the possible pros and cons of using a virtual credit card?

Between advances in technology and the coronavirus pandemic, we’re using cash a lot less these days. But chances are cash isn’t the only thing that may be on the way out. A growing number of card issuers are offering ‘virtual’ credit cards. Here’s what’s involved.

How do virtual credit cards work?

Virtual credit cards are a digital version of the traditional credit card. Instead of carrying around a slice of plastic, you use a number to make purchases. These numbers don’t appear on your card. In fact, they’re randomly generated numbers – typically unique to each purchase, and usually generated by a browser extension or app linked to your card issuer.

Let’s say for instance, you’re shopping online. You make your selection of purchases as normal, but when you check out, instead of entering your credit card details, you would just enter your virtual card number. If you shop at a different site, a different number will be generated to make a payment.

In this way, virtual credit cards are potentially a lot more secure than traditional cards. You’re not handing over all the usual details of your credit card – like your card number, expiry date and CVC number. And because virtual credit card numbers are often single-use only, this makes it a lot harder for cyber-thieves to access your account or fraudulently use your card details.

What are the advantages of a virtual credit card?

The extra layer of security that virtual credit cards can offer customers is a key benefit, helping reduce your risk of fraud in online transactions. ‘Card not present’ (CNP) fraud, where the fraudster steals valid card details and uses them to make online shopping or other payments without the card, is the number one type of payment fraud in Australia. So, virtual credit cards can hold plenty of appeal – perhaps especially during the pandemic, when online shopping has hit record highs according to the Australian Bureau of Statistics.

Virtual credit cards are also usually plastic-free. They are often managed through a digital wallet such as Apple Pay, Samsung Pay, or Google Pay.

Are virtual credit cards available in Australia?

Already, virtual credit cards are widely used overseas, and they’re expected to rise in popularity. A UK study by Juniper Research has predicted that the global value of virtual card transactions will reach US$6.8 trillion in 2026. But there’s a catch. These figures apply to B2B transactions – in other words, payments between businesses. And that’s mostly where virtual credit cards are used here in Australia at present. A number of the bigger banks, including the Commonwealth Bank, Westpac and HSBC, offer virtual credit cards to their business customers. One of the key selling points is that compared to a physical card, a virtual credit card makes it easier for businesses to impose transaction limits and track spending while maintaining the security of the card. And presumably, it puts an end to the days of employees having to hunt around to see who’s got the company credit card.

Which banks offer virtual credit cards to consumers?

As it stands right now, virtual credit cards for use by consumers are a little thin on the ground in Australia. But the choice has expanded in recent years:

  • Online lender MoneyMe offers ‘Freestyle’ – a virtual credit card, with credit limits of up to $20,000.
  • Nimble offers its AnyTime Virtual MasterCard with limits of up to $10,000.
  • Visa offers ‘Visa Virtual’ accounts, which essentially function as virtual credit cards.

Given the skyrocketing growth of online shopping, it’s possible more banks will come on board with virtual credit cards in the months and years ahead. So, it may be a case of ‘watch this space’ to see what’s available in the future.

What are the possible pros and cons of using a virtual credit card?

For many people, the primary benefit associated with virtual credit cards is security. But there’s also an element of convenience. You don’t have to wait for your card to arrive in the mail, and there are none of those “uh-oh” moments when you go to make a purchase and realise you can’t find your card.

However, while virtual credit cards may be a potentially safer way to make online transactions than a physical credit card, they’re not entirely fraud-proof. You still need to be vigilant with your credit card accounts, and check your card statements regularly to be sure there are no unauthorised transactions.

When it comes to selecting and using a virtual credit card, the same rules of thumb apply that work for regular plastic cards. Look for a card with a low interest rate, a decent number of interest-free days, and low (or zero) annual fees. Sticking to purchases you can comfortably pay off in the interest-free period makes it a lot easier to avoid high interest debt. As we mentioned, perhaps the biggest challenge at present is that the range of Australian providers offering virtual credit cards is rather limited. So for now at least, if you’ve decided a credit card is the right option for you then it could be worth comparing traditional credit cards and searching for one that suits your needs with Canstar.

Compare Credit Cards

If you’re currently comparing physical credit cards, the comparison table below displays some of the low-interest credit cards currently available on Canstar’s database for Australians looking to spend around $2,000 per month. Please note that this table features links direct to the provider’s’ websites, and is sorted by Star Rating (highest to lowest), followed by provider name (alphabetical). Use Canstar’s credit card comparison selector to view a wider range of credit cards.

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> Looking to find a better deal? Compare car insurancecar loanshealth insurancecredit cards as well as home loans, with Canstar.

This content was reviewed by Sub Editor Tom Letts and Digital Editor Amanda Horswill as part of our fact-checking process.

Nicola is a personal finance writer with nearly two decades of industry experience. A former chartered accountant, who holds a Bachelor of Commerce and a Master of Education degree, Nicola has contributed to several popular magazines including the Australian Women’s Weekly, Money and Real Living.

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