Virtual credit cards have a limited use case – When should you consider one?

• Like physical credit cards, a virtual credit card has its own unique card number, validity date, expiry date, and CVV number.
  
• Since there's no swiping involved with a virtual card for payments, chances of fraudulent activities are reduced.
  
• A virtual credit card cannot be used for offline transactions
  

There are credit cards and then there are virtual credit cards. As the name suggests, these cards do not have a physical version, but can be used virtually.

Virtual credit cards are digital versions of physical credit cards. “The most simplified way to visualise a virtual credit card is to imagine a credit card without the physical form reduced to a 16 digit (card) number,” says Mohit Bedi, co-founder and chief business officer, Kiwi, a credit card platform. You can get a virtual credit card, only if you have a physical credit card.

Like physical credit cards, a virtual credit card has its own unique card number, validity date, expiry date, and CVV number which are visible online.

“You can also set your own spending limit on the virtual credit card. However, these cards may usually have very short validity,” says Adhil Shetty, CEO, BankBazaar, a financial marketplace.

Benefits of a virtual credit card

Let us look at some of the benefits of a virtual credit card and why they exist in the first place.

They are convenient to use: As the virtual credit card lacks a physical presence, its information can be stored on your phone and used for transactions, eliminating the need to carry physical cards, reducing hassle. Users can start using the card almost instantly without having to wait for a physical card to be delivered.

“Since virtual credit cards exist in digital form, users don't need to carry a physical card. This can be particularly convenient for online transactions,” says Aishwarya Jaishankar, Co-founder and COO, Hyperface, a card issuance solution.

Virtual credit cards are more secure: Since there's no swiping involved with a virtual card for payments, chances of fraudulent activities are reduced.

You can set a limit: You also get the chance to set the limit on your virtual credit card and the payments would be authenticated by one-time passwords (OTPs) sent on your registered mobile number.

Let us say you have set a limit of ₹10,000 on your virtual credit card.You are protected as your total damage even in case of a fraudulent activity will be restricted to ₹10,000.

Limitations of virtual credit cards

However, virtual credit cards have certain limitations and cannot replace a physical credit card.

Cannot be used for offline transactions: A virtual credit card can only be used virtually.

“Virtual credit cards traditionally cater to only online/card-not-present transactions. For offline transactions, the cardholder still had to make use of the physical card as it had to be swiped on the point-of-sale (PoS) terminal,” says Bedi. So you cannot use a virtual for shopping at a store. This limits its functionality. For the same reason you cannot use it as a travel credit card, especially when travelling abroad.

However, this is set to change. “This is no longer an issue with credit cards on UPI. All offline merchants have a QR code at their establishments. The user can simply use their (virtual) RuPay credit card on UPI and pay for offline transactions by scanning the QR codes.

Right now, this feature is exclusively accessible to RuPay credit card holders. If you possess a Visa or MasterCard credit card, you won't have the option to use it for UPI payments. Also, currently only a few banks are supporting linking RuPay credit cards on UPI.

Needs an internet connection to work: To generate or use virtual credit cards, users need access to the internet. “In situations with poor connectivity or during travel, this could be a limitation,” says Jaishankar.

Limited validity: Virtual cards have expiration dates or time limits, limiting their long-term use. So, when using it for an online purchase, you will not be able to convert your purchase into an EMI, which you can do with a physical credit card.

Virtual credit cards serve a specific purpose

Virtual credit cards primarily cater to individuals seeking secure and convenient online payment solutions. They're designed for those who prioritise enhanced security measures for digital transactions.

These cards suit frequent online shoppers, providing an added layer of protection against fraud and unauthorised transactions.

Additionally, they appeal to individuals concerned about sharing their primary card details online, and not wanting to provide credit card details online, and thus offers a safer payment option. They are thus, not a replacement for physical credit cards, but a feature that one may use if required.