I am a bit paranoid about using credit cards online. Therefore, I prefer to use wallets (such as PayTM) or UPI on new sites or the sites I do not trust much. A problem with this approach is that you cannot use wallets or UPI on international websites. In addition, there are a few minor issues with these modes of payment. With UPI, the amount is directly debited from your bank account and you do not get credit. You must have money in your bank account before you make the payment. In case of PayTM, you can get credit if you add money using credit cards but PayTM has now started charging a transaction fee for adding money to wallet using credit cards. With debit cards or UPI, you can add money to the wallet without incurring any cost, but you do not get credit. Hence, you must choose between getting credit or paying a transaction fee.
Is there a way that provides you both security and credit for online purchases? Yes, there is. You can explore the option of Virtual credit cards.
What Are the Important Features of a Virtual Card?
- There is no physical card.
- Virtual Credit/debit cards are offered as an add-on to an existing physical credit/debit card. You can generate the virtual card instantly through net banking.
- You will get a card number, CVV and expiry date. Just that there will be no plastic.
- You can use virtual credit/debit card for only online transactions. You cannot use the virtual card for physical/Point-of-sale transactions.
- You can use the card for both domestic and international online transactions.
- Virtual cards are likely to be for one-time usage. You may be able to define a usage (validity) period, beyond which the card expires automatically.
- You can block or cancel your virtual card whenever you want.
For instance, SBI issues virtual debit card that is valid up to a maximum of 48 hours or till the transaction is complete. It is a single usage card. So, if you do not use the card within 48 hours of creation, the card will automatically lapse. The minimum amount is Rs 100 and the maximum amount is Rs 50,000. The card is issued by marking a lien on the bank account balance. You do not lose any interest because of the lien. When the transaction is done, it is posted to your bank account.
On the other hand, ICICI Bank allows a virtual credit card. The card is issued within the overall credit limit of your primary credit card. You do not get any additional credit limit. You can block the card whenever you want.
Note that not all banks may provide this facility. You can check with your bank if it can provide you a virtual credit or debit card.
How Can a Virtual Credit Card Help?
Virtual cards can enhance security. For instance, if you want to use your credit card on a relatively unknown website, you can use a single usage virtual credit/debit card. Even if the details are stolen, these will not be any use to the thief since the virtual card is only for one-time usage.
You can use the card for both online transactions on both domestic and international websites. There is no difference between the ways virtual card or physical cards are used.
If your bank allows a virtual card, you can expect almost instant issuance. After all, they are not really providing you any additional credit limit. The credit limit for the virtual card is within the overall limit for the primary card. Thus, issuance of such a card is unlikely to affect your credit score adversely. The virtual cards are issued without any additional cost.
By the way, you can prevent frauds (or reduce the extent of damage) on your primary (physical) credit card by setting transaction limits on your credit/debit cards too. For instance, your credit limit on the primary card may be Rs 2 lacs. However, you can set the daily transaction limit on your card to only Rs 5,000. Or you can block certain types of transactions, say international online transactions. When you want to transact beyond a transaction limit, you can increase the limit temporarily. Or when you want to make payment on an international website, you can temporarily unblock such transactions. This approach is not very clean, will require constant operational effort and will not eliminate frauds completely. However, if you set limits smartly, you will certainly be able to reduce the extent of damage in case of fraud.
A virtual credit card is a relatively cleaner approach and simpler to understand.
Have you ever used a virtual credit/debit card? Let us know your experience in the comments section.