A “virtual credit card” is a randomly generated card number that’s linked to a valid credit card account. Virtual cards are created inside internet banking apps and are useful in a variety of ways – including for business.
The main reason to use one is that it doesn’t give the merchant you’re buying from any more information than they need to complete the transaction – handy when you’re buying from a new vendor, an unsafe website, or anywhere you suspect might be dodgy.
Using it means they won’t have your billing address, your actual credit card number, its expiry date, or your security code, so you can use the virtual card with a high degree of confidence that the transaction will complete without any chance of someone stealing your info and spending your money fraudulently.
But when it comes to using one for business, you probably have a few questions. We happen to have answers.
As mentioned in the intro, a virtual card offers an extra layer of security because it’s not a physical object. For starters, it can’t be stolen, but even more importantly, it doesn’t give anyone the information they’d need to make fraudulent purchases on your real card.
It’s easy to generate a new virtual card on your banking app. A few taps of the screen and you have a virtual card for use anywhere that accepts them. They are best for online purchases, of course, and great for buying subscriptions to services you might only temporarily need as you can specify when the cards expire, and that way avoid being automatically billed when the subscription runs out.
As a business, if you issue a virtual card that’s attached to a business credit card, you can set spending limits, define spending categories, and have quite granular control over what it can be used for. This is handy when it comes to controlling employee expenses and ensuring they comply with company policies.
Recording expenses is much easier when you have virtual cards that generate detailed digital records. This simplifies the process of tracking and reconciling expenses and makes life easier for your bookkeeper/accountant.
You can issue virtual cards and link them to specific vendors, limiting their validity period and the amounts that can be spent on them. This is especially useful for one-time purchases from unknown vendors with whom you do not have a trusted relationship, as it reduces the chances of fraud or your information ending up in places you don’t want it to be.
Not accepted everywhere
Transacting online with a virtual card is all well and good, but less so when you’re transacting in person as shops don’t accept them yet. Or if they do, we’re unaware of them, so if you’re a physical shop that accepts virtual cards, please let us know.
Should you assign virtual cards for employee expenses, you may need to update your internal financial processes and workflows to accommodate the change. Or just tell your accountant and let them handle it.
No cash withdrawals
While this function may arrive in the future, it’s currently not possible to draw cash from an ATM with a virtual card. Fortunately, South Africa’s banking system is pretty advanced and there are other ways to get cash from your account without cards, so look into those if you need to draw.
The pros seem to outweigh the cons of using virtual credit cards in your business, so if your situation supports it and you’re happy to do it, go wild. Of course, we always recommend that you talk to your money people first to get their buy-in.
Tell them we said it’s okay and let them take it from there.