What is a virtual credit card and how do they work?

What is a virtual credit card?

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When you use a virtual card for online payments, your actual credit card number will be protected in case of a data breach or credit card fraud. You can generate virtual card numbers whenever you want extra peace of mind that your payment information will be protected.

How does a virtual credit card work?

Virtual credit cards can be generated through your existing credit card account, typically through online banking or your credit card issuer’s mobile app. Sometimes, virtual cards can be stored in a digital wallet.

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Instead of using your physical credit card number, you can enter this virtual card number at online checkouts. The transaction will show up on your account statement as if you had used your physical credit card.

How to get a virtual credit card

1. Get a credit card

A virtual credit card is attached to your existing credit card account, so it’s necessary to have a credit card first. Most credit card issuers offer virtual cards, including Mastercard, Visa, and American Express. Corporate cards like Ramp also offer virtual cards.

2. Log into your credit card account

Most banks or credit card accounts will have the option to request a virtual card under “Account Settings” in their online platform or mobile app. If you can’t find where to get virtual cards, check out their online help center.

3. Download your credit card issuer’s app

In some cases, you might have to download a separate app from your credit card issuer that’s specifically for virtual credit cards. Your virtual credit card might also be stored in a digital wallet on your phone, like Apple Pay or Google Pay.

4. Generate a virtual credit card number

Receive a unique virtual credit card number. Note that some banks, like Citi and Capital One, will give you a different number for different merchants. Others, like American Express, will let you use the same number for different merchants, if you choose.

5. Set spending limits, vendor restrictions, and when you want the card to expire

Next, you can choose when your virtual credit card will expire. It can be configured for one-time use or kept active for recurring expenses over a specified period of time. At this point, you can also set spending limits and vendor restrictions.

6. Start using your virtual credit card

Finally, you can use your virtual credit card for online shopping the same way you would a physical card. Just enter the virtual card number, CVV security code, and expiration date at checkout. You can also use your virtual card number over the phone, or in-store in some cases. If your virtual card is stored in your phone’s digital wallet, you can use it for contactless payments.

Pros and cons of using virtual credit cards

What is the difference between a virtual credit card and a virtual debit card?

The primary difference between a virtual credit card and a virtual debit card is that the former allows businesses to make purchases on credit, while the latter draws funds directly from the company's bank account. Both virtual cards offer extra security and spending control for businesses.

What is the difference between a virtual credit card and a virtual prepaid card?

Virtual credit cards offer a line of credit for purchases, while virtual prepaid cards are loaded with funds from a bank account. Virtual prepaid cards typically don't offer rewards and come with fewer, if any, spending controls than virtual credit cards for businesses.

Reasons to use virtual credit cards as a business

As a business, there are several scenarios where you might prefer to use a virtual credit card. These include:

Better vendor management

Assigning virtual credit cards to employees can help you keep track of vendors being used by your team. Virtual cards that are designed for businesses let you set spending limits, the length of time the card will stay active, and lock the card to a specific vendor. This is especially useful for SaaS subscription management. With corporate cards with expense management features, company cardholders can simply request virtual cards when they need to purchase from an online vendor, and you can issue them immediately.

Automated accounts payable

Virtual cards with integrated accounting tools can replace tedious, error-prone manual accounting methods like ACH payments or wire transfers. They let you pay immediately, giving you real-time visibility into your cash flow for better budgeting decisions and stronger vendor relationships. By setting transaction limits on virtual cards, you can also prevent unexpected fees. With accounting integrations, you can map transactions to your general ledger and chart of accounts, automating your workflow.

More secure transactions

Sometimes, you want added protection against fraud. Virtual cards can protect you from potentially risky transactions by keeping your real credit card information private. You might opt to use a virtual card for sensitive vendor payments, international transfers with a higher risk of unauthorized access, large capital investments, or dealing with suppliers in geopolitically unstable regions. 

Differences between virtual credit cards and physical cards

Since virtual and physical credit cards have different use cases, businesses often choose to issue both types of cards to employees. Here are just a few examples of the advantages each one offers—and why you might select one over the other in certain situations.

Physical cards

Physical cards can easily be used in person or online. They can also be added to your Apple or Google Pay account. Unlike a virtual card, you don’t need to add a physical card to a virtual wallet in order to use it.

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However, each employee can only have one physical card active. In most cases, employers don't have the option to transfer cards between employees, and you can’t order a physical version of an existing virtual card.

Virtual cards

As an employer, you can issue unlimited virtual cards at any time. Virtual cards can also be transferred among employees or canceled whenever necessary. Like physical cards, virtual cards can be used for both in-store and online purchases.

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Much like a physical card, you can add your virtual card to Apple Pay or Google Pay for in-store purchases at stores that accept those forms of payment. However, virtual cards can't be used at physical retail locations that don’t participate in either program.

Generate unlimited free virtual credit cards with Ramp

Ramp offers unlimited virtual and physical corporate cards that give business owners the control they need while empowering employees to make necessary purchases. Our cards have built-in spend management tools, so you can easily assign virtual cards on the go and set customizable rules around spending amounts, approved venders, and how long the card will stay active.

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In the Ramp dashboard, you can get full visibility into spending across your business with real-time insights to help your business cut costs. Filter spending by vendor, category, or other rules to find exactly what you’re looking for. Our platform also integrates with accounting software so you can automatically sync data and generate expense reports.