Everything you need to know about virtual business credit cards

A virtual card is a digital version of a credit card with its own unique card number, expiration date and security code. Generally issued to make a payment for a specific transaction, you can cancel a virtual business credit card at any time.  

Key takeaways

• Virtual credit cards can remain valid for up to three years, but many businesses use them to make one-off transactions for a set amount

• They are a secure payment method that can help businesses to better control their spending and avoid falling victim to fraud

• You can’t use them to withdraw cash 

• Some companies, such as car hire firms, may only accept payment with a physical card

What is a virtual business credit card?

Virtual business credit cards are digital cards that function in the same way as physical business credit cards. However, while you can add them to digital wallets such as Apple Pay and Google Pay, you don’t get a plastic card to carry around.

The most common way to use virtual business cards is for a single transaction, such as a piece of equipment. Doing this makes it more difficult for fraudsters to steal money via a corporate credit card because the card details can’t be used again once that transaction has gone through.

Many companies also use them to limit and monitor the amount employees spend on expenses, such as travel and accommodation.

How do virtual business credit cards work?

To use virtual business credit cards, a provider must first approve your business for a line of credit – just as it would when approving you for a traditional business credit card.

You can then request virtual credit cards as and when you need them. To get a virtual credit card for a one-off transaction, for example, you would follow the steps below:

• Send an approved payment file to your virtual card provider

• Receive a unique 16-digit virtual card number with the funds to cover the payment

• The card provider then delivers the card to the payee on your behalf, often via a secure email

• The payee then processes the transaction and receives the funds

How can my business use a virtual credit card?

You can use a virtual credit card in many of the same ways you can use a standard business credit card. Types of spending for which you can use a virtual business credit card include:

• Supplier payments – You can set up a virtual credit card to make a single payment or a series of payments to a supplier or contractor

• Travel costs – You can use a virtual credit card to cover air fares and accommodation

• Employee expenses – Many virtual credit card providers allow you to issue virtual cards to employees to cover expenses, such as fuel or entertaining clients

What are the benefits of using a virtual business credit card?

Virtual business credit cards offer a range of advantages on top of the benefits offered by standard business cards. These include:

• Safer online spending – Creating a unique virtual card for online transactions can help to prevent fraud

• Budgeting – With virtual credit cards, you can set limits on spending by employees and contractors, via both the amount available and the validity of the card 

• Financial management – Virtual cards enable companies to track and analyse spending patterns in real time

• Automation – Virtual card transactions can be set up to feed automatically into accounting systems

• Avoiding subscription creep – Using one-shot virtual credit cards to pay for subscriptions can help you avoid wasting money on unnecessary renewals

• Improved security – You can cancel virtual cards in seconds if lost or stolen. You can also replace them immediately, so business can continue without interruption

Are there any disadvantages of a virtual card?

Virtual credit cards are useful, but they won’t replace a physical card in every situation. Possible drawbacks include:

• No cash withdrawals – You can’t use a virtual card at ATMs to withdraw cash or check your balance

• Limited in-store use – You can only use a virtual card in shops if your phone supports mobile payments and you add the card to a digital wallet

• Not always accepted for deposits – Hotels and car hire companies often require a physical card for pre-authorisations, so a virtual card may not be enough

• Fewer options available – Not all providers offer virtual cards yet, although availability is growing quickly

Are virtual credit cards secure?

Yes, virtual credit cards are safe and secure. In fact, they offer better security than traditional credit cards in many ways. This is particularly true if you use them to pay for one-off transactions, because the card can only be used once and for the amount agreed.

The real-time payment information you receive with virtual cards also makes it easier to spot any issues quickly, while the ability to cancel virtual cards instantly means you can shut down suspicious use quickly and easily.

In summary

Virtual business credit cards give you access to the advantages of the latest payment technology. However, they can’t do everything a traditional business credit card can, so you may want to keep a physical card to hand as well.

When choosing a virtual business credit card provider, consider the following:

• The network it uses and whether this fits with your business spending requirements;

• The software systems it uses and whether they can integrate with your company’s accounting systems;

• The number of cards you can have at once (for you and your employees) and whether that is sufficient for your needs;

• The controls you can set — such as spending limits — and how they can serve your business.

Read more…

• How to get a traditional business card

• How to use a traditional business card