A virtual credit card, also known as a throwaway or temporary credit card, is a disposable payment card used for one-time purchases on the Internet. It consists of a single-use credit card number generated by the credit card issuer. In most cases, virtual credit card numbers can only be used once, and will expire after about a month if not used; this setup helps protects the user from online credit card fraud. Virtual credit cards can usually be obtained from a consumer's current credit card issuer.
A consumer can use a virtual credit card in the same manner as a regular credit card, with several notable exceptions. He can set the credit limit on each temporary credit card according to the amount he wishes to be available. The virtual card is linked to the user's physical credit card number, but only the user knows the physical credit card information. This helps protect the user from possible theft of his real credit card number and subsequent fraudulent use of it.
Virtual credit cards have several advantages. Primary among these is the protection they afford cardholders from online credit card fraud, preventing the card number from being stolen and used to run up high charges. Virtual cards generally have a low credit limit, set by the owner for one-time use. They also help protect the user from identity theft, because the card cannot be used to provide proof of the thief's false identity. Virtual cards do not carry any of the owner's personal information, and only carry the temporary number provided by the company.
Another benefit of a virtual credit card is its convenience. These cards allow the user to make online purchases without having to search for his physical credit card information first. All that the user needs to remember is the virtual card number itself.
Temporary credit cards can also protect cardholders from another type of scam proliferating on the Internet. Some unscrupulous companies offer "free" applications that require the user to input his credit card number, among other information. The unsuspecting user then finds that his credit card has been charged for the application after a period of time has passed. The use of a virtual credit card with an extremely low credit limit keeps the user from being noticeably affected by these scams.
Virtual credit cards do come with certain disadvantages, however. They are usually limited to use on the Internet and cannot be used for offline transactions. Furthermore, their online use is restricted to certain types of purchases, as some merchants require real credit cards and personal information.
The short expiry time for virtual cards, while providing security for the user, can also be an inconvenience. Failure to use the card before its expiry date means having to get a new one. The credit card user may specifically request a different duration for his virtual credit card, as well as the ability to reuse a virtual card number for a certain merchant for the sake of convenience. Doing so may, however, raise the risks associated with using credit cards online. The processing time for virtual credit cards tends to be longer than that of physical credit cards as well.