This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Virtual credit cards have been around for years in the consumer credit card market, helping to provide an extra layer of security. But virtual cards may also help corporate and business card users streamline the management of various types of payments.
What Is a Virtual Card and Why Might You Need It?
A virtual credit card is a unique credit card number that you can request from your card provider. Although you don't receive a physical credit card, this number is linked to your existing credit card account. A virtual card can be meant for digital transactions but may also be used in a mobile wallet for in-person transactions.
You may have multiple virtual credit card numbers linked to the same corporate or business credit card. This can help you take advantage of the parameters you can set for each individual virtual card.
For example, you can set up an employee virtual card so that delivery drivers can only use it at fuel stations, preventing unauthorized use with other merchants. Or you could use it to pay suppliers in a way where you don’t have to give out your physical credit card number, helping to ensure a safer way to pay.
How Do Virtual Cards Work?
Virtual credit cards can work in conjunction with corporate or business cards. In order to get one, you may need to have a corporate or business credit card to create and manage new virtual credit cards.
The use of virtual credit cards can help businesses streamline their accounting, help prevent fraud, and potentially save money.
Here are some common steps to get a virtual credit card, although the process may vary by card issuer:
Request a virtual card: You can add a virtual credit card from within your card issuer’s online portal or mobile app, if available.
Set virtual card parameters: Depending on your card issuer, you may be able to set limits on purchase amounts, merchant names or category codes, expiration dates, and more. You can issue them to yourself, to other people, or even to suppliers to pay your invoices.
Get a virtual card number: Your card issuer will create a new credit card number that serves as your virtual credit card. This virtual card is now ready to use.
Track spending: Purchases that you or others make with each virtual credit card will post to your business credit card account.
Benefits of Virtual Cards
Managing your company's payments can be key to maintaining steady operations. But that could come at a real cost if you have to allocate time and resources to address fraudulent charges or reconcile card statements with a multitude of receipts.
A virtual credit card may help you gain a better hold on cash-flow management, including:
Tracking purchases: You can potentially create tags for each virtual credit card to better track and classify purchases in your accounting system.
Assignment of virtual cards: As a company financial decision maker, manager, or business owner, you may issue cards to yourself, your employees, contractors, suppliers, job candidates, and others affiliated with your company.
Overall spending: You may be able to set limits for the total dollar amount spent or place restrictions on where the card can be used, such as with individual merchants or entire categories of merchants.
Expiration date: Virtual credit cards may be tied to the expiration date of your credit card, or you can set them to close automatically after a certain date or number of transactions.
Accounts payable (AP) integrations: AP systems can help manage purchases made with virtual credit cards just as they would with business credit cards. Some systems may integrate directly with your card issuer, allowing you to help manage virtual cards more easily.
Use Cases For Virtual Credit Cards
Virtual credit cards can be used in many different situations, including to:
Negotiate supplier terms: Businesses might be able to negotiate better terms with suppliers by using virtual credit cards help to facilitate payments.
Manage employee spending: A virtual card with spending limits or restrictions for use with certain vendors could add efficiencies to expense reporting.
Pay infrequent or one-time suppliers: A business could send payment via a virtual credit card number with a limit for the exact amount and set it to deactivate after use.
Cover variable costs from regular vendors: A virtual card with a pre-set spending limit could be used to pay variable costs as they are incurred from regular vendors, such as a Software as a Service provider or marketing consultant.
Recover from fraudulent charges: If your virtual card number is stolen or lost, it may be a simple matter to cancel it and issue a new one without having to replace the actual business credit card.
Link purchases and payments: You can streamline your accounting by tagging virtual cards to specific projects, accounts, or clients.
Provide travel, meals, and incidentals for non-employees: If you’re covering certain travel and meal costs for consultants or job candidates, you can issue them a virtual card with limits so they can pay for those charges themselves, without the need to file for reimbursement later.
The Future of B2B Payments
The use of virtual credit cards can help businesses streamline their accounting, help prevent fraud, and potentially save money.
Photo: Getty Images
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