How to use a virtual card — benefits, types, and more

How does it differ from a physical card?

Here’s what else differentiates a virtual card, besides the obvious fact that it’s not something physical you can hold in your hand.

• Virtual cards can be used the instant they’re generated. To use physical cards, you need to wait until they arrive via snail mail.
• While your physical card might contain your bank’s information, a virtual card doesn’t.
• We usually use the same physical card for several years. Virtual cards, on the other hand, can be temporary and even generated for one time usage.

Get your card right away

There’s no need to make a bank appointment or wait for a snail mail delivery. Log online, generate your card — and get it instantly.

Pay anywhere you want

Virtual cards are accepted both online and off. If you want to use your virtual card at a brick and mortar store, the cashier will simply process it as a “card not present” transaction (but not every store will do that, so check ahead of time if necessary).

Protect your bank information private

Unlike a physical credit card, a virtual card doesn’t expose your bank information. It’s not even connected to your bank account or physical card. It’s an online card that got uploaded with money, and that’s the only thing anyone charging you needs to know.

Set spending limits

If you’re issuing virtual cards to employees, setting spending limits protects your finances from misuse, whether malicious or by mistake. Hopefully, you only let trustworthy employees spend your business’ money, but even then, no employee needs access to your business’ full account.

Manage spending

Since it all happens online, it’s very easy to allocate desired amounts of funds to specific virtual cards, divided by departments or sub-categories of each department, and get a deeper understanding of how it’s all spent.

That, in turn, can make it easier to decide where to make budget cuts and where to expand.

Reconcile faster and analyze more efficiently

One of the biggest virtual card differences from other methods is reconciliation speed. Since everything is done digitally here — you can easily issue a virtual card and connect it to your business payment system, all online — reconciling what was spent, and where, is much faster.

Your system can likely automatically register the product or service that was acquired, how much it cost, and who it was purchased from. Then it can produce smart insights about your business finances, like your cash flow and expected upcoming expenses. Perhaps it can even provide predictions and data-based recommendations for action.

Single-use virtual cards

Single-use virtual cards are basically a one time credit card. You set the card to be charged a certain amount, and that’s all anyone can charge you. The cost to use a single-use virtual card is only what you pay anyway per transaction on your POS.

Plus, as its name applies, it can only be used once. If you need to make another virtual payment afterward, you’ll need a new virtual card.

Multi-use virtual cards

Multi-use virtual cards have two use cases. On the one hand, you can use it and reuse it over and over again. On the other hand, you can give it to someone else.

This can be useful if you’re moving on to another role, and someone else is taking over at your current workplace, or if a different department in the business needs the virtual card now.

Temporary virtual cards

Virtual cards are known for being temporary, even though, as you’ll see below, it’s not always the case. That said, it’s one of their benefits — the ability to produce a short term card, even a single-use card, to pay for what you need over a set time period and then let the card expire.

Permanent virtual cards

Yes, visual credit cards can be permanent too, just like physical cards. Paying for subscriptions? Simply tired of constantly issuing new temporary virtual cards? Issue a permanent visual card, or set its expiration date to a long time from now.

Virtual cards

A virtual credit card is a vehicle for payment. You provide its info (say, its 16 digit number and three digit security code) when it’s time to make a payment, and the transaction is instantly made.

Digital wallets

A digital wallet is not something you can provide to make a transaction happen, just like you don’t simply hand out your entire physical wallet to the cashier at the store.

Like that physical wallet, your digital wallet stores all the virtual payment methods, including virtual credit cards, that you’ve connected to it. When it’s time to pay, you open your digital wallet app,  digitally pull out the payment method you want to use (for example, a virtual credit card), and make the payment.

Through your bank

Some banks already offer to produce virtual credit cards for customers. You’ll need to call or email your bank to find out whether it does, and if so, what’s the process of getting one.

Through online payment platforms

Some of the platforms that can help you get a virtual card online include:

• PayPal
• Amazon Pay
• Google Pay
• Stripe
• Shopify
• Melio

Making online transactions

You can do this in a few simple steps:

1. When you’re ready to pay, choose to pay with a credit or debit card during checkout. You likely won’t have a “virtual card” option, as it’s treated the same as a physical credit card in this case.
2. Provide your card information: card number, CVV code and your expiration date.
3. Add your billing address.
4. Finish the transaction and make the payment as you would with a physical card.

Online shopping safety tips

If your virtual card is your entryway to buying online, or expanding the online sources you shop from, keep these safety tips in mind.

• Look for reviews. The easiest way to check a brand’s legitimacy is to find reviews (preferably verified ones) on third party sites like Amazon. If the business has testimonials on its website, check whether the customer photos look real and whether there are specifics in the testimonials themselves to increase the chances they are real — maybe they include people’s full name or go into greater detail of how this purchase helped beyond “best company ever.”
• Check out the business’ social media. True, you can stumble upon a reliable business without active social media profiles (especially if it’s a small business and the owner or team juggles a lot), just like you can find a really good plumber who doesn’t have a website. But if the business is active on social media, it’s an added layer of trust that there are real people behind it. Plus, you can read the comments they get or the posts they’ve been tagged in to see what customers say about them.
• Review the URL in the address bar. First, see if there are any typos in the business’ name. If so, run a Google search to learn if it’s intentional or if it’s potentially a fake website that’s imitating the original one. Second, you could also click on the padlock in the address bar to ensure the business has a valid SSL certificate for extra security. If there’s no padlock, it’s not secure and you should proceed with caution.
• Use a payment option that keeps your sensitive information private. As mentioned above, a virtual credit card is a good idea because it doesn’t reveal your physical credit card or bank account information.
• Keep track of your credit card statement and bank account, so you know only approved transactions were deducted. If you see suspicious transactions, contact your credit card issuer or your bank immediately.
• Stay skeptical. If an offer seems too good to be true, it just might be that — especially if it’s from an unknown vendor. Sometimes it’s cheaper to pay more to ensure you’re buying from a safe source.

Virtual card compatibility

• Vendors accepting virtual cards: The first thing you need to know to use your virtual card offline is whether your chosen vendors even accept virtual cards. While some do, and can process them as “card not present transactions,” others don’t. Perhaps they don’t understand the value yet, or they’re concerned about potentially high fees when processing virtual cards, and therefore they don’t offer this option.
• Contactless payments: As mentioned above, businesses can process virtual cards as “card not present transactions.” This can be done using both physical and virtual POS terminals, so it can be done both online and off.
• Mobile wallets: You can add virtual cards to your digital wallet. If your vendor accepts digital payments, all you have to do is tap to pay.

Potential challenges and solutions

Virtual cards sound like the simplest way to go, but sometimes there are challenges in using them too. Here’s how to get prepared.

• Payment reconciliation. Yes, we’ve listed it as a benefit, but reconciliation gets easier with virtual cards only if you use smart tools to navigate the many virtual cards you might be producing. It’s best not to manage reconciliation manually.
• Some businesses find it too expensive (fees wise) to accept virtual cards. Use a platform like Melio, that lets you pay in your favorite method while your vendor receives payment in their favorite method.
• Accounting systems don’t always integrate with virtual cards. You need an accounting system that supports technological advancements that simplify and amplify accounting. Consider reviewing your tech stack versus your needs, and making adjustments where needed.

How to get a virtual credit card

One of the simplest ways to generate a virtual card is through a payment platform like Melio. When you do, you get your virtual card via email.

Melio’s virtual card is actually issued by JPMorgan Chase, so security is a top priority. One of the security measures we take is having you click on “get card details” in order to view card information. There’s no need for sensitive information like this to be readily available in your inbox.

Managing your virtual card

Generating your virtual card is the easy part. Managing its funds wisely is what makes the real difference.

• Set virtual card policies: Decide which roles have access to virtual cards in your business, how often they can use them, how much they can spend and what they can buy with these cards.
• Create strategic controls. Use a platform that lets you monitor transactions (if possible, in real time), review reports, and analyze usage to optimize purchase patterns, purposes and budgets. Bonus points if you get proactive or predictive analytics to simplify data-based decision making.

Set usage policies, monitor budget spending and readjust as needed

Check out the previous section in this article to verify you’re on top of how your cards are used.

This will help you readjust along the way. Maybe some roles need more budget or more access to virtual cards while others need less than expected. Maybe some cards can be reassigned elsewhere in the business, or used for different vendors.

Ensure your vendor can accept virtual cards via email

Some businesses accept virtual cards, but they don’t accept them via email. This means you’ll always need to go to their website and type all your card details, or — more time consuming — call them on the phone.

It might not be a big deal for some business owners or teams, and might not be a reason to drop a supplier. But if you make lots of payments via email, verify you’re clear on how to optimize your time here.

Make it worthwhile for vendors to accept virtual cards

Some businesses are hesitant to jump into the credit card world, physical or virtual, because they’re concerned about the potential fees.

So when you want to pay a vendor with a single-use virtual card, or any type of virtual card really, consider taking the lead. Let vendors know that accepting virtual cards can lead to faster payments — if the process is faster for you, maybe you can pay them faster than with other payment methods. And once you make the payment, the money gets immediately transferred to their accounts.

Say goodbye to unused virtual cards

They might feel like just another intangible digital object, but virtual cards are real credit cards, with real money charged to them, ready to be used with a few clicks of a button.

Ongoing monitoring helps you see which cards aren’t being used. When setting policies, decide when to deactivate them so you don’t have a bunch of forgotten, unused money sitting around on the internet.