The rapid strides that technology is taking often come with its own share of positives and unique challenges. With e-commerce and online retail options aplenty, life has become easier for us as we can make several purchases just by swiping our credit or debit cards. However, using your credit cards for purchases at websites of untrustworthy retailers can also lead to fraud and online theft, the incidence of which is on the rise. To avoid the chances of credit card fraud, the trend of using virtual credit cards for online transactions is gaining traction. In the following sections we will compare credit cards to the emerging virtual cards.
Virtual Credit Card: what is it?
A virtual credit card (VCC) is a one-time credit card that you can use for making any online purchase. The amount of credit assigned to a virtual card is debited directly from the savings account to which the virtual card is linked. Virtual cards are valid for only a limited time and may be topped up with a certain amount and can be used for a single transaction only. Any unused balance on the card is automatically credited back to the debited savings account. Virtual credit cards are called so as they have no real existence as no physical card is issued to the user.
How are Virtual Cards different from Credit Cards?
Although a virtual credit card is called so, it resembles a debit card as the card is already loaded with a certain amount of money, unlike a credit card which has a set credit limit and for which you make payments after your bill cycle is complete and a bill is generated by the issuer.
The scope of the virtual card is also relatively small as it can only be used for online shopping purposes and has to be used within a 24 hour period. POS (point of sales transaction) is not possible as no physical card is issued. As it is not a physical card, it differs from reloadable prepaid cards offered by various Indian banks.
The convenience of a virtual card is in the fact that you can make use of it safely, without any worries, as you do not have to provide details like your credit card number, CVV number and other important details to the merchant. All such details in case of a virtual card are temporary and they can be used for only a single purchase so cannot be reused even if your virtual card details fall into the hands of unscrupulous individuals.
You can create a virtual credit card online for free. It comes with its own card number, CVV number etc., which are redundant after the purchase is made, therefor not leaving you vulnerable to online fraud.
Using your credit card for making purchases from merchants, especially lesser known merchant sites, leaves you exposed to the possibility of cyber thefts, which virtual credit cards safeguard you from.
Key Features of a Virtual Card
- High security – It is highly secure as it lessens the chances of exposing your credit card details. The cards are valid for a 24 hour period from creation of the card, depending on the bank that issues it and hence automatically expires and the balance is credited back to your savings account if not used within the stipulated time frame. To create the card, the bank sends a One Time Password (OTP) to your registered mobile number and only after this verification, the transaction is considered successful.
- Can be used internationally- Most virtual cards can be used for making purchases internationally as well as on domestic websites. However, a few banks might issue virtual cards that can be used only in India.
- Flexibility of use- While the security of the card is high, it is also extremely flexible to use as you can fill any sum into your card for purchasing things online. Also, in case your transaction fails, the amount is refunded to your main account and you do not have to worry about receiving the money.
Can you compare your virtual card to your credit card?
While the fad of using a virtual card is on the rise in India, with major banks like ICICI Bank, State Bank of India, HDFC Bank, Axis Bank offering this service, the importance of your credit card cannot be negated. The following are a few instances where credit cards score over their virtual counterpart. Circumstances where a Credit Card is Preferable.
- Building your credit score
- No interest-free period benefit on virtual card
- No rewards points on virtual card
- No discounts or special offers on purchases made using virtual cards.
- Virtual cards cannot be used to make point of sales purchases.
- EMI offers cannot be availed when using a virtual card.
As a result of these and other reasons as mentioned above, credit cards are still a preferred option as compared to virtual cards especially among young Indian who have started to use plastic money more frequently these days.