First Person: The Benefits of a Virtual Credit Card

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Identity theft and credit card fraud are two of the biggest fears for many credit card holders. The costs of these illegal activities not only raise the cost of credit for honest users, but victims can suffer for years trying to rebuild their good financial reputation. However, there is a way to outsmart online thieves and provide at least one layer of protection to your credit and identity: use virtual credit card numbers when making Internet purchases.

How a Virtual Credit Card Program Works

The concept, first developed nearly a decade ago, carries various names. Depending on the company, it may be referred to as a virtual, perishable, disposable, or single-use credit card program. However it is labeled, the programs operate basically the same. The credit card company provides you with a separate credit card number to use for a specific purchase that is different from, but yet tied to, your true credit card number.

In most cases, you must access the online merchant's site through your credit card company's site in order to use a virtual credit card number. In some instances, the credit company provides you with downloadable software that provides you with numbers that can be used for mail and telephone orders as well as online shopping.

The Pros

Because your true credit card number is never given to the merchant it remains protected. Should a thief gain access to the virtual number, charges are limited to the single merchant for the purpose of making purchases. That's a significant limitation for most credit card thieves. In addition, most programs also allow you to add additional security measures, including setting a dollar limit for purchases with the virtual number or an expiration date.

The Cons

As with any good thing, there are always negative aspects. Such is also true of virtual credit card numbers. Presently, you cannot retrieve a single-use number for purchases made directly at the merchant's brick and mortar place of business. Also, certain merchants, such as online ticket sellers, frequently require you to physically present the credit card used to complete the online transaction in order to pick up your items. Since your virtual number will differ from the number on your physical card, you may be denied access to your merchandise if you use a virtual number in the initial online transaction.

Many credit card companies place a maximum 12-month expiration date on single-use cards, although Discover allows the numbers to be used until the expiration date of your current plastic credit card. The disadvantage of an expiration date is that if you set up a virtual number for automatic bill payments, you will need to retrieve a new number and update it in your bill pay system prior to the expiration date to prevent having a legitimate payment declined.

Not all credit card companies offer virtual number programs. Check with your credit card issuer to see if this safeguard is available.

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