What are Contactless Cards and Virtual Credit Cards?

We are continuously moving towards a future that is more technology driven, a future that is paperless and cashless. New methods of shopping like credit cards, debit cards, internet banking and online wallets are both convenient and environment friendly. The latest upgrades have come in the form of contactless credit card and virtual credit card. Contactless cards make spending simpler as you can just tap and pay for smaller transactions. Virtual credit cards, on the other hand, do not have any plastic existence. These are issued as add-on card on your primary credit card and all details are available online.

So, let us delve deeper to understand how contactless credit cards and virtual credit cards work.

Contactless Cards

Contactless cards work on the Near Field Communication (NFC) technology. Unlike chip cards, you need not hand it over to anyone for swiping. The NFC technology authorizes the transaction through radio transmissions when it is tapped or waved near a terminal. It reduces the risk of card loss or fraud and also makes small shopping faster and more convenient. Note that contactless cards can be used to make payment of only up to ₹2,000 for a single transaction.

Now you would be thinking about how to get a credit card that is enabled with the contactless feature and how would you recognize one. Contactless cards have the Paywave sign on the top right corner of the card. Also, these can only be used at the NFC enabled POS terminals so you must ask at the counter about it. Look for the same Paywave sign on the POS machine. You should hold the card near the machine and wait for the beep sound or a green light that indicates successful transaction.

A number of banks are now offering contactless credit and debit cards to the users. ICICI Bank Coral Contactless credit card is one of the first and most popular contactless cards.  Your existing credit card cannot be enabled with the contactless feature; you must apply for a new credit card in order to get one.

Virtual Credit Cards

Virtual credit card is a fairly new concept in India. These cards have no physical existence and they are offered as an add-on feature on your primary credit card. All details related to this credit card such as the card number, valid through date and CVV are available online. You can transact online with a credit limit of your own choice within the credit limit of your primary credit card. These cards offer safe and convenient ways of shopping online and you can also earn rewards on your transactions. You can contact your credit card provider to know whether you are eligible to avail this feature on your primary card. If yes, you can send a virtual credit card application online and once the bank processes it, you are ready to use the card.

HDFC Bank NetSafe, ICICI Bank VCC, Kotak Netc@rd and SBI Virtual Card are among the top virtual card offerings in the market. Most of the banks prefer to call it a ‘Virtual Card’ and not ‘Virtual Credit Card’ as they are also offered with debit cards. Virtual cards, usually, have a validity period of 24 hours after which they expire and the amount goes back to your debit or credit card against which you have taken the card.

Virtual cards provide better safety when shopping online as they have a short validity period.

What are the benefits of contactless and virtual credit cards?

Contactless credit cards mainly offer convenience and ease of use as you do not have to hand over your credit card to anyone else for swiping. Since the card stays with you all the time, the chances of card loss or theft will also be minimized. Moreover, you can only spend ₹2,000 in a contactless transaction. For example, if you have SBI StyleUP Contactless credit card, you can make a transaction of Rs. 2,000 using the contactless feature but if you want to make a purchase of Rs. 5,000, you will have to swipe the card and enter your PIN. Since the contactless transaction amount has been capped at Rs. 2,000, any loss due to technical glitch will only be minimal.

The main benefit offered by virtual credit cards is with respect to safety of usage. The card is not physically available so there is no chance of card loss or theft. Mostly, virtual credit cards have a short life and they lapse after usage so even if the details of your virtual card are saved, it will not harm you in any way. These are also quite easy to use for online transactions only.

What are the risks associated with contactless and virtual credit cards?

While the tap and pay technology gives more convenience to the card holders, it also triggers frictionless spending. When you can make small payments without the need to enter pin or swipe the card, overspending may become a habit. It is easy for these small transactions to slip under the radar until you get the next statement. A huge bill that falls short of your budget may result in missed payments which, in turn, could have a negative impact on your credit score. Apart from this, if your credit card is lost and it lands in the wrong hands, it is quite easy for the fraudster to make several small transactions.

The first drawback of virtual credit cards is that these cards are not readily available; there are only a handful of banks that provide this facility to their customers. Currently, only SBI, HDFC, ICICI and Kotak offer virtual credit cards. Secondly, it can only be used online since there is no physical existence of this card. If you want to withdraw cash with credit card, virtual cards would not be of any help.

Read More: How to Prevent Credit Card Frauds

Also, since the virtual card number expires after use, it will be difficult to return the products that you would have purchased online. For the same reason, it is not advised to use virtual cards for transactions wherein you are required to collect physical tickets later as they might ask you to show the credit card but its number would not match with the virtual card and you might end up in a hassle.

Frauds can still happen in case you used the card for recurring payments or the bank did not change the CVV on your virtual card. Most of the credit cards offer zero lost card liability cover so you are getting enough safety already in case you lose your card.

The Bottom Line

Both contactless cards and virtual cards have their own pros and cons. While contactless cards are more readily available in the market, virtual credit card is a fairly new concept in our country. There is no harm in getting a contactless credit card; it will only make shopping more convenient for you. However, virtual credit cards are seemingly less helpful and should only be used when you do not trust a shopping website or when you do not want auto renewal on your card but there is no such option. But then again there are other ways to tackle these problems than use a virtual credit card.