The world’s industries are becoming increasingly digital, and finance is no exception. While traditional payment methods are still widely accepted and used, they’re becoming quickly supplemented with innovative solutions designed to address our evolving financial needs. One example is the virtual card, which is a digital representation of physical credit or debit cards.
In the next five years, the virtual card market is expected to grow by 280%. This anticipated growth is a testament to the many advantages that digital cards have over physical cards, including ease of use, convenience, and enhanced security benefits.
In this guide, we’ll explain what virtual cards are and the pros and cons of virtual card payments versus credit or debit cards. We’ll also outline several use cases that highlight how virtual cards are a modern convenience you can’t afford to live without.
What is a virtual card?
Let’s start by outlining how virtual cards work. It’s really quite simple: virtual cards are a digital representation of physical credit cards or debit cards.
Just like an actual credit card, virtual cards are made up of the cardholder’s name, card number, CVV, and expiration date. All of this information is contained in a digital form that’s usually accessed by a mobile app or online platform. Because of their digital nature, virtual cards are sometimes also called digital cards.
Virtual cards are offered by largely the same issuers as most credit cards, such as Mastercard or Visa. Unlike traditional cards however, people can use a virtual credit card to make online purchases as soon as they have access to the virtual card number. To make purchases in stores, people can add their virtual credit card number to digital wallets, such as Apple Pay or Google Pay.
Digital cards offer the same convenience and safety as existing credit cards, only with some extra advantages when it comes to security and ease of use. We’ll discuss these in more detail further in this article.
Pros and cons of virtual cards vs physical cards
To better understand the difference between physical and virtual cards, let’s explore the pros and cons each. Below, we’ve outlined the main advantages and disadvantages of using both physical cards and virtual debit and credit cards.
Pros of virtual cards
- Enhanced security: Virtual cards offer better security when compared to real credit cards. They cannot be lost, misplaced, or stolen and have a lower risk of fraud or unauthorized charges.
- Instant use: Once a card issuer has generated a virtual credit card, it can be used to make purchases immediately. This is more convenient than physical cards, which usually need to be delivered in the mail.
- Expense tracking: It’s easier to control and keep track of your spending with virtual cards. Since all transaction data is available online, you can quickly monitor and categorize your expenses.
- Easy to use: Virtual cards can be added to a digital wallet, like Google Pay or Apple Pay, or used to make payments online without having to pull out your actual card.
Cons of virtual cards
- Limited acceptance: Virtual cards may not accepted in situations where a physical card is required, for example swiping at a point of sale terminal.
- No withdrawals: One way that virtual debit cards and credit cards are limited is that they cannot be used to withdraw cash from ATMs.
- Technology dependance: Virtual cards are reliant on technology, and use can be disrupted in the case of a system outage or technical issue.
Pros of physical cards
- Universally accepted: Physical cards are widely accepted at most businesses, including those that may not yet accept payment from virtual cards or digital wallets.
- Cash withdrawals: Unlike most virtual cards, physical cards can be used to withdraw money from ATMs.
Cons of physical cards
- Less immediate: Unlike virtual cards, you usually have to wait for physical cards to be produced and sent in the mail before they can be used.
- Lower security: Physical cards have the potential to be lost or stolen and can be more vulnerable to fraud than virtual cards.
- Physical maintenance: If not looked after properly, physical cards can wear down or break down and may require replacement when damaged or overused.
The benefits of using virtual cards
Let’s learn more about virtual cards by taking a closer look at their benefits.
One of the main reasons you may want to consider using a virtual card is their enhanced security features. Digital cards are designed with extra security to help protect your credit card information. Some key security benefits of using virtual cards include:
- Digital only: One of the clearest security benefits of a virtual card is that it doesn’t exist in physical form. This means you don’t have to worry about it being lost, misplaced, or stolen, eliminating the risk of card theft and the worry that accompanies that risk.
- Limited use: Some virtual cards can be created for single or specific-use transactions. This reduces the risk of fraud or unauthorized use. Once a transaction is complete or the balance has been used up, the card becomes useless. Since these types of virtual cards have limitations on use, they’re a less attractive target for scammers when compared with regular credit cards that have limitless options for use.
- Instant lock and unlock: In most cases, virtual cards can easily be locked or frozen through a mobile app, instantly blocking any unauthorized transactions. This is a useful feature that can immediately provide peace of mind if there are security concerns or suspicion of misuse of virtual cards.
- Dynamic CVV: Certain types of virtual cards come with dynamic CVV codes that change frequently. These types of cards offer an added layer of security, as even if a criminal managed to get a hold of the CVV, it will become invalid after a period of time.
Virtual cards can help make budgeting easier. Users can set specific spending limits and restrict transactions to certain categories, helping those who need an extra push to stick to a budget. Here’s how you can use virtual cards to better manage your expenditure.
- Spending limits: You can set daily, weekly, or monthly spending limits on your virtual credit or debit card to make sure you stay within your budget. These include transaction limits and ATM limits for cash withdrawals. All of this can be managed from a simple mobile app.
- Category restrictions: In some cases, you may be able to configure your virtual card to only work for certain types of transactions, for example, to make purchases online or be used for a subscription. This can help prevent you from overspending in areas where you don’t intend to.
- Transaction monitoring: Most virtual card platforms provide detailed transaction history and clear insights into your expenditure, usually from a simple mobile app or online platform. This means you can track your expenses more easily and have a better picture of your financial habits.
One thing that makes virtual cards different from your actual card is their convenience. Below are just some examples of how digital cards are more convenient in daily life than traditional debit or credit cards.
- Instant use: Anyone can get a virtual credit card and start using it instantly. Unlike physical cards, you don’t have to wait for the card to arrive in the mail before you can access your credit card account.
- Digital access: You can access your virtual card easily through a mobile app or online platform. This means that when you’re ready to buy something online, you don’t have to fetch your wallet to find your actual card number. Instead, it’s just a few clicks away. Add your virtual card to a digital wallet to make it even more widely accepted.
- No physical maintenance: Because they can’t be lost or damaged, you don’t have to worry about protecting your card from damage or keeping it safe in your wallet.
Another benefit of using virtual cards over traditional cards is that they can offer an extra layer of privacy. Here’s how.
- Protect personal data: In some cases when using a virtual card, you don’t need to share your actual card information with the merchant. This protects your sensitive information from potential data breaches.
- Anonymity: Because you can use virtual cards without revealing your identity, they add an extra layer of anonymity when compared to a traditional credit card.
Designed for travel and foreign exchange
One of the primary benefits of virtual cards is how well they are suited for travellers and those who like to shop online. You could even say that virtual credit cards are designed for that very purpose. Here are some distinct advantages for those users:
- Multi-currency support: Some virtual card providers, such as ZEN.COM, link virtual cards with a multi-currency account. This means that users can hold and transact in multiple currencies, saving on currency conversion fees when shopping abroad and online.
- Excellent currency exchange: When linked to a multi-currency account, virtual cards like the Zen Mastercard can be used to pay in foreign currencies or withdraw from ATMs abroad without having to cover any additional exchange fees. For travellers, this means more money stays in your personal account.
Just as some credit cards offer reward programs for their users, there are also virtual card programs that offer benefits to their users. For example, when using the ZEN Mastercard, users can enjoy perks such as:
- Shopping protection: Support for when something unexpected goes wrong with a purchase, for example, cancelled flights or dodgy online purchases.
- Extended warranty: An extra year’s warranty for all devices purchased with a ZEN Mastercard.
- Instant cashback: Users can receive up to 15% cashback when shopping at partnering stores.
Use cases for virtual cards
The beauty of virtual cards is their versatility. They can be used in various scenarios to make purchases easier, more convenient, and more secure. Below are several examples of how you can use virtual cards in your everyday life:
1. Manage personal expenses
One way to use your virtual card is to get a better hold over your personal expenses. You can set a monthly or weekly spending limit, and when that amount has been reached, you’ll have to either pause your expenditure or adjust your budget. In the long run, this can help you avoid overspending and maybe even save some cash.
2. Manage subscriptions
Most of us are balancing multiple subscriptions these days, from streaming services to software and gym memberships. You can use a virtual card to pay for these subscriptions and set up the card so it only allows the specific recurring payments. This gives you more control over your subscriptions and allows you to easily see how much you’re spending on them each month.
3. Travel expenses
One of the main benefits of virtual cards is their ease of use when traveling abroad, but they’re also useful for local travel too. You can set spending limits on your virtual card to ensure you don’t go over your travel budget. When linked to a multi-currency account, the benefits of using a virtual card are numerous. You can choose to pay in a foreign currency, exchange your money instantly, and withdraw from ATMs abroad without having to cover additional exchange fees.
4. High-risk transactions
Virtual cards are a safer choice for transactions that carry a higher risk of fraud or unauthorized charges, such as online gambling or purchases from less-reputable merchants. While they may not be immune or bulletproof, their ability to be restricted to specific transactions or limited use reduce the risks that occur with such payments.
5. Family and shared finances
One little known use for virtual cards is a tool to manage family or shared finances. The head of the household can request a virtual card for each member of the household and set different spending limits for each person. This creates a transparent and efficient financial system for the household.
Peaceful shopping with a virtual card
Virtual cards are, without a doubt, the card of the future. With unparalleled convenience, security, and control over your expenditure, it’s easy to see why they’re quickly surpassing traditional credit and debit cards. If you haven’t yet experienced the benefits for yourself, it’s time we changed that. Choose the ZEN Mastercard as your virtual credit card and enjoy access to a multi-currency digital account that offers support for 28 currencies, enhanced security benefits, and a seamless mobile app where you can get a snapshot of your accounts, cards, and expenses with ease.
We’ve designed ZEN for everyday users, because everyone deserves peaceful shopping. Set up your account now and start using your card instantly.