We are constantly bombarded with notices about data breaches. These data breaches can lead to identity theft, which can hurt your credit score. That could take some time to repair. Fixing identity theft can take from a month to over a year. This is based on the extent of the fraud. How cooperative your financial institution is.
At worst, Identity theft can hinder your financial goals, preventing you from purchasing a home, a new car, or obtaining additional credit. At best, it can be a mild inconvenience that requires you to cancel your credit card and wait for a new one to arrive. However, you could be proactive in protecting your credit by using virtual credit cards. Today, a virtual credit card is not just for free trials. They can be used as a tool to protect all your online purchases. Let’s review how this could be used in conjunction with other safety techniques.
Credit Card Protection
There are various ways that financial institutions are currently using to protect your identity when you use your credit card. American Express, Discover, Visa, and Mastercard use many methods to prevent fraud. They use chip technology, CID code, or a CVV code. They also use an expiration date, PINs, and the Luhn Algorithm. As consumers, we can protect our credit cards by using RFID wallets and sleeves, avoiding questionable websites, and protecting our credit card details. We can set up alerts for card-not-present transactions for an extra layer of security. Consumers can also freeze their debit and credit cards when not in use. Avoid clicking on phishing links sent via text or email.
Finally, review your debit and card balances regularly. This is how I was able to stop someone from using my credit card to pay for their daycare services. Question all transactions of $1.00 or less because this indicates that someone is attempting to use your card without your permission. This is one of the methods they use to test cards.
However, if a thief can steal your identity, you have another line of protection. At the credit bureau, you can freeze your credit report. This will prevent them from opening up any credit in your name. This is a good practice if you do not plan to open any new credit. It can be an inconvenience if you are applying for new credit. You will have to contact each credit bureau and have them unfreeze your account for a specific time frame. Hence, an ounce of prevention goes a long way to obtain peace of mind. Finally, there is another payment method that may be more convenient.
Virtual Credit Card
A virtual credit card uses virtual card numbers instead of a physical card. The virtual number can be linked to your bank account or credit card. It is very flexible. You can set up spending limits. You can link it to your savings accounts or checking account. They are a safe and effective tool to mask credit card information. When making a contactless payment or online purchase, this new form of payment can be invaluable.
How Virtual Cards Protect
Here is how virtual cards work as a protection against identity thieves and fraud.
- Virtual cards use a unique virtual credit card number instead of your actual credit card number from your physical card.
- You control how the virtual card is used. You can set up a virtual card for one-time use, for a limited time, or for a specific merchant. This will prevent unauthorized recurring charges.
- If a virtual card number is stolen, you can deactivate it through your bank or card issuer. Then you create a new one without having to wait for a new card to arrive.
- Virtual card numbers are linked to your credit card account. Every transaction is processed and will appear on your monthly billing statement.
- Some virtual card services allow you to lock a card to a specific merchant, preventing it from being used even if stolen.
When To Use Virtual Credit Cards
Provided the merchant accepts virtual credit cards, you can use them for subscription services, recurring payments, free trial period offers, or any online purchase. It can also be used to pay business expenses.
For subscriptions, you can use it to manage recurring payments, spending limits, and cancellation options. For free trial periods, I recommend officially canceling the membership rather than letting the payment method reject the service. It could be considered fraud to have a credit card on file that is not active.
When shopping online, you can protect your actual card information when using unfamiliar websites. If a merchant experiences a data breach and your virtual card is compromised, you can disable the virtual card instead of having to order a new credit card.
Finally, it provides a straightforward method for sharing access to company funds with employees and freelancers. Therefore, you can maintain strict control over spending and all purchase details. You have the option of deleting the virtual card number once the business is concluded. You can then create new ones as needed.
Where Can You Obtain Virtual Credit Cards
Currently, four in ten consumers in the United States have virtual credit cards. This usage is driven by Millennials, Gen Z, and higher-income consumers. The virtual card market is experiencing rapid growth, according to Juniper Research. They predict global growth from 36 billion in 2023 to 175 billion by 2028. These numbers suggest that there could be a significant increase in the adoption of virtual credit cards across demographics.
Check with your issuer or bank first. They may offer virtual card numbers as a feature for your accounts. Most banks provide virtual cards or services that generate virtual credit cards. This includes Capital One (ENO browser extension), Citibank (for select cardholders), and American Express (Amex Go for Corporate cardholders). Discover Card also provides virtual card numbers, known as virtual credit cards (VCNs). You can create a virtual card number by saving your Discover Card in Google Wallet or Google Chrome and following the prompts to enroll.
Privacy Virtual Cards
There are dedicated virtual card services, such as Privacy and Wise. You can obtain a privacy card from these services if you are unable to get one through your bank or credit card issuer. There is also Revolut, Skrill, and iCloud. Let’s review Privacy and Wise for now.
Privacy.com
Privacy.com is a free virtual credit card that can shield your payment information from data breaches and fraud. They keep your financial and personal information secure. It creates unique, anonymized 16-digit payment cards that mask your actual financial information. As an added protection, you can lock your privacy card to a single merchant. Privacy.com is PCI-DSS compliant and SOC 2 Type II certified. Finally, your data is secured by 256-bit encryption.
In addition to these safety features, you have full control over your financial data. You can set spending limits and pause or close a privacy card at any time. Privacy.com boasts an impressive 250,000 users in the United States. They have processed more than $3 billion. The cost to use this service ranges from a free plan to $25/Month premium plan. Your personal needs will determine the price you pay for this service.
Wise
Wise is based in Australia, but consumers in the United States can use their virtual debit services. The Wise virtual debit card lets you spend using the mid-market rate online, in-store, and while traveling. The funds are available from your Wise account, on your phone or laptop. The Wise card is a virtual debit card that can be used to make purchases in the USA. The Wise card functions as a debit card that can hold US dollars.
However, you can hold up to 40+ currencies at once. You can convert them in real-time using the free Wise app, then spend online, in-store, and abroad with your virtual card. There is no need to carry a wallet, and the risk of your credit being compromised. You can obtain this service from the Wise App or website. The card can be used to make purchases within their app, online, or in person. You can also withdraw cash at ATMs that support contactless payments.
Virtual Cards Are Not Accepted Everywhere
Even though virtual card numbers are processed similarly to physical cards through a credit card network, specific merchants may choose not to accept certain networks. Some stores that primarily process in-person transactions may not be able to process this type of payment option. It may require a manual entry, or contactless payments may not accept them. There are some small businesses or retail stores that may not accept digital wallets (like Apple Pay or Google Pay). Many retailers have limited or no capability to process a virtual card for in-store purchases. Therefore, user experiences may vary.
Hence, there are some limitations to using virtual cards. Most will work for online and in-app purchases with merchants that can accept your credit card network. If your card can be added to a digital wallet, then you can use it with any merchant that can process digital wallet payments.
Prepaid Card and Gift Cards
If this all sounds too new to wrap your head around, prepaid and gift cards are still an option. However, they do not come without their own issues with fraud. Scammers have found a way to steal those numbers and the funds associated with them. Therefore, be very careful when purchasing cards where the account numbers can be easily taken. Always inspect them for signs of tampering, buy from trusted vendors, and purchase them from behind the counter or locked display cases. Only buy gift cards directly from the official retailer’s websites. Finally, keep your receipt and the card, should you need to report fraud or have the funds reimbursed.
Recap: A Virtual Credit Card Is Not Just For Free Trials
I have always wondered if I left my wallet at home with my physical credit card, how could I purchase? I frequently change bags, and this is a real possibility. Could I use my virtual wallet on my phone, which holds various credit cards, to make a purchase? At the retail establishments I frequent, this has not been possible. However, I plan to explore this option for online purchases. I have a Discover card, and I will start with it.
Privacy cards could be the payment option of the future. It could reduce the ever-growing identity theft and credit card fraud that seems to impact all consumers. In 2024, the Federal Trade Commission (FTC) received over 1.1 million complaints for identity theft. They also received about 2.6 million Fraud complaints. Overall, this resulted in over $12.7 billion in total financial losses. I am hoping that the hackers do not figure out how to circumvent this new technology. So far, it appears to be very promising.
Steps To Obtain A Virtual Card.
- Ask your bank or credit card issuer first
- Research virtual card services second
- Make sure your favorite retailer and online stores accept them
- Look for free service plans
- Make sure you can do the entire process online or via an app for convenience
- Look for flexibility to pause or close
- Make sure you can set spending limits
- Find out if they can be merchant-specific
- Test each service with small amounts of charges
Steps To Avoid Credit Card and Identity Fraud
Here are things you can do today to avoid credit card fraud.
- Use RFID wallets and sleeves
- Avoiding questionable websites
- Do not share your credit card information with strangers
- Set up alerts for card-not-present transactions for an extra layer of security
- Freeze their debit and credit cards when not in use
- Freeze your credit reports at all three credit bureaus: Experian, Equifax, and TransUnion
- Avoid clicking on phishing links sent via text or email
- Review your debit and card balances regularly
- Shred all documents that contain your financial information
This post is for informational purposes only. Please consult a financial advisor before making any financial decisions that involve risk. They are best in helping you determine the best course of action for your financial needs. I am not paid if you click any of the links provided.
Additional Reading…
Anti-Theft RFID Wallets For Credit Card Blocking
Documents You Should Shred To Avoid Credit Fraud