Short answer: yes.
We’ll explain why in a moment. But first, many of you are probably wondering: “What is a virtual credit card?”
The answer is much like the name implies. A virtual credit card is a randomly assigned 16 digit electronic number associated with an account – just like with a normal credit card – only there’s no physical card, and there are predetermined spending limits and expiration dates. Often times these can be limited to a single transaction.
Virtual credit cards are growing both for personal and business use. Over a fourth of Fortune 100 companies already use virtual credit cards, and they are growing quickly in popularity particularly for small businesses.
So what are their benefits? Many of the same provided by other digital finance solutions. We outline a few of the main points below.
Greater transparency and control on account spend
A common stress point for companies: how to control employee spending, particularly for new users.
The approval process for authorizing a user and accounting their receipts requires a lot of labor (accountants nod your head), but not doing it can cost your company thousands in frivolous employee spending – as not every employee has learned good credit card etiquette.
A virtual credit card allows for a precise spend amount for a certain period of time, or even to a particular merchant. That means no potential for cards to be misused outside of their immediate business needs. For instance, say you have a small company with many young employees, but not enough HR to train them all in proper card use. With virtual cards, you don’t need to (for the most part). You can issue a virtual card instantly under your company account, set the spending limit, and continue stress free.
One of our best use cases is the ability to recruit potential employees. Instead of having them use their own personal funds to book travel and then going through the arduous task of reimbursement send them a virtual credit card with a budget like this one.
Convenient replacement and security
In addition to account control and transparency, the example above also illustrates the convenience of instant card generation. While company cards previously required an approval process to add an authorized user – plus 3-7 business days for a card to arrive – virtual credit cards can be ready in a matter of secondsminutes.
The convenience also extends to replacing lost cards (or rather the need to never do so). Every single reader has undoubtedly lost either a personal or business card (or both), and knows the stress of canceling a card, reporting fraudulent charges, and then waiting for a new card to arrive. Virtual cards by design cannot be lost, and therefore never need to replaced. They can also be turned off at any time. Combined, these factors mean you both don’t need to worry about internal fraudulent spending (by employees), or external fraudulent spending (from stolen or lost cards).
Are there downsides?
Like with any product, there are potential downsides to virtual cards.
The main drawback of a virtual credit card, ironically, is the inability to show the physical card. Occasionally hotels, rental cars, and even in-store pickups will require seeing a card for physical purchase. As the future shifts digital, this is becoming less of an issue (as solutions like mobile wallets and other forms of verification become common), but it could definitely be problematic at smaller and older vendors.
In the same vein, returns on a virtual card whose number has expired can be a hassle, as merchants usually look to reverse the charge on the same card – not debit a separate account. You’ll need to contact your bank in this situation.
The other main drawback to virtual cards is there still slightly limited in the number of banks that offer them. However most major credit card issuers including Visa, Amex, and Mastercard offer virtual cards, and the number of banks will only increase as the technology advances.
In the end we strongly believe in the long term of benefits of virtual credit cards. In the current state it makes the most sense to have a mix of hard cards and virtual cards, to minimize your pain points across the board, especially given the ease of setup and application for virtual cards. If you need more information on how to set up a virtual card, check out our portal here.