Virtual Credit Cards: Are They Right for Your Business? | Fora Financial
Virtual Credit Cards: Are They Right for Your Business?
September 06, 2019

Virtual Credit Cards: Are They Right for Your Business?

Credit cards have long been the preferred payment method for savvy business owners due to their potential rewards and enhanced security benefits. However, the recent uptick in data breaches has many business owners seeking a more secure alternative.

From 2014 to 2017, the number of reported data breaches more than doubled to 1,579, according to Statista. As online security becomes a greater concern, it’s worth considering alternative methods of payment that may protect your company’s and your customers’ data more effectively. A virtual credit card is one option that’s growing in popularity, and we’ll review it in this post.

Everything You Should Know About Virtual Credit Cards:

What is a Virtual Credit Card?

When you use a credit card to shop online or pay a vendor for services, the recipient has access to your card’s details, including your card number, expiration date, security code, and billing address. That means if the merchant is dishonest or their data gets compromised, someone else can use your credit card information to make fraudulent purchases.

To help credit card users avoid these risks, some credit card issuers provide you with a unique, randomly generated virtual card number linked to your credit card account. With some virtual credit cards, you have the option to set a maximum purchase limit and an expiration date up to a year from its creation.

To an online merchant, the virtual credit card information looks no different than a traditional credit card. However, since they don’t have access to the number, it’s less likely to be stolen in a security breach.

What Are the Benefits and Limitations of Virtual Credit Cards?

The primary benefit of a virtual credit card is that it helps protect your company’s data and finances in the event of a data breach. This in itself can save you time and frustration, since the chances of being involved in a cyber-attack are now one in four.

In addition, if you operate an online business, your customers may feel more protected using a virtual credit card. This is especially important for new businesses, which may not have credibility with the public yet. Your online sales may increase if customers are confident that their financial information is protected.

On the other hand, the biggest downside of virtual credit cards is that they can only be used online. That means in situations where you’re required to swipe a physical credit card, your information is still at risk. Not to mention, returns and refunds can be problematic if your virtual credit card number has expired. And, if you make a reservation online for a hotel or rental car with a virtual credit card, you may be required to show a physical card at check-in.

Where Can You Get a Virtual Credit Card for Your Business?

Currently, Bank of America, Capital One, and Citi are three of the larger banks offering virtual credit card numbers. There are also prepaid card options, and a handful of smaller companies have built their businesses around virtual credit cards.

American Express used to offer virtual credit cards but stopped supplying them in 2004. Similarly, Discover discontinued their virtual credit card program in 2014. Chase and Wells Fargo don’t currently have a virtual option.

If your primary business credit card is with any of these providers, you may want to consider switching. Or, you can ask your current provider if a virtual option will be available in the future.

Conclusion: Virtual Credit Cards Can Help Protect Your Business

While they don’t solve all problems, virtual credit cards add a layer of security to your company’s information, serving as a buffer between your data and a merchant or service provider.  Using a virtual credit card for your online transactions can help reduce the potential impact if your company’s data is compromised in a data breach. These types of events are becoming more and more likely, so it’s crucial to protect your company.

If you think a virtual credit card is right for your business, ask your credit card company what options they have available. Or, consider opening a card with a company that has a track record of success with virtual accounts.

Have you created a virtual account number to protect your business’s finances? Tell us about the experience in the comment section below!

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].