The most powerful payment tool in business

During the outbreak of COVID-19 in 2020, we witnessed an extraordinary shift in digital financial trends—businesses are being compelled to modernize. 

New tech continues to emerge, and today we’ll discuss one prominent tool in the digital payment world—the virtual credit card. Quickly becoming the corporate world's new best friend, virtual credit card usage is on the rise. A study by Juniper Research, Ltd reports that by 2026 B2B virtual credit card transactions in the U.S. will reach $3.7 trillion. 

Virtual cards are gaining popularity as a result of the numerous benefits they offer. In this article, we’ll walk through their benefits and how they work functionally in an organization, and answer frequently asked questions.

What is a virtual card?

A virtual card is a randomly generated card number associated with an existing account—similar to physical credit or debit cards (but with or without the plastic). Virtual cards were originally designed for security, enabling cardholders to make payments without exposing real card numbers. Today, their flexibility and control have proven to be powerful when it comes to the way businesses manage card payments.

Benefits of using virtual credit cards

Increased security & control

When you use virtual cards for business spending, you provide a strong measure of security by safeguarding your real account information, while also enabling control over each and every transaction your company needs to charge. When keeping a credit card on file for things like vendor payments, subscription charges, or paid media platforms, you run the risk of fraud or even wrongful billing. With virtual cards, you can avoid these problems. Set spending limits to prevent cards from being overcharged, and should fraud occur, you can easily cancel a virtual card without affecting your entire credit line or having to cancel all your cards and order new ones. 

When it comes to employee spending, virtual cards empower teams with a secure, controlled way to charge company expenses. Before, employees would either receive their own physical cards, share cards, or pay out of pocket and submit expenses for reimbursement—all of which come with their own drawbacks. By arming your team with virtual cards, you ensure every expense is approved before it happens, everyone is accountable for the charges they incur, and the company maintains total visibility over spending. 

Better operational management & visibility

With stronger security and control comes better operational management and visibility over company card spending. The digital nature of virtual cards means that with every card created and every transaction charged, companies can capture more data and gain full transparency across spending activity. 

Virtual cards are a dynamic tool that enables users to set limits and usage restrictions, tag cards and transactions with additional data to support bookkeeping, and provide real-time insights into spending for up-to-the-minute reporting. Companies can now analyze financial performance in real-time rather than waiting until the end of the month. Purchases are preapproved before they happen—enabling finance teams to evaluate budgeting decisions before money has even left the building.

Optimize cash flow and rewards

By their nature, virtual cards linked to your bank of choice create a flexible, highly visible expense management system, maximizing your working capital and generating rewards. Not all virtual cards are created equal. While some solutions provide virtual cards for a debit account or to be used like charge cards, true virtual credit cards enable companies to use their existing credit line more flexibly. Instead of making employees pay for work-related expenses out of their own pockets and then reimbursing them with cash, you can enable team members to charge those same expenses to the company’s credit line. This way, you can take advantage of rewards or benefits that you would have missed out on otherwise. For the many companies that are savvy when it comes to using credit as a way to prolong billing cycles, using virtual credit cards across team spending allows them to keep cash in interest-bearing accounts longer than if they had paid cash.

How do virtual credit cards work?

Virtual cards work like regular credit cards in that they can be used for online, in-app, or on-file transactions—and depending on the card issuer, you may be able to add them to mobile wallets for in-store purchases, too. But how you create a virtual card and what you can do with it largely depends on which platform or service you’ve chosen to use. At a high level, here’s the basic way of creating and using virtual cards:

Create new cards

When you create a virtual card, a unique card number is generated in association with your existing account. This unique number also has an expiration date and security code, so it works just the same as any payment card. This all happens instantly, giving you a secure payment method in seconds.

Distribute cards

Every virtual card provider has different distribution capabilities, some more limited than others. When it comes to Extend, distribution is a core feature that enables many of the benefits previously discussed. 

When someone needs to charge an expense, managers or owners can instantly send them a virtual card with as little as an email address, and individuals can also request virtual cards directly from the cardholder.

Set control limits

Give virtual cards spending limits, and expiration dates, create automatic refills for recurring expenses and assign merchant category restrictions—giving you increased controls over how and when employees and make charges.

Manage & monitor spend

Get real-time activity updates, automatically sort and organize transactions to see where money is going, and understand who is spending where—giving your finance department better insight into company spending with every transaction.

The easiest way to leverage the power of virtual cards

See how Extend puts the control in your hands with all the features and capabilities of our easy-to-use app.

Get in touch

The flexibility of virtual cards lends itself to many use cases—whenever you need to charge an expense or equip someone with a card to use when they need it, virtual cards can be created on demand and distributed instantly. If you’d like to learn more about how virtual cards could benefit your business, we’re here to help you assess the options: get in touch.

Additional Virtual Card FAQs

What is the point of using virtual credit cards?

Over the years, virtual credit cards have become an increasingly popular topic – and for good reason. By keeping everything virtual, these cards add security to businesses' expenses and private information, enrich data tracking, and add flexibility to company spend management systems. Further, virtual cards take the hassle out of workforce spending – you can instantly distribute cards and spend limits to remote workers, gain real-time oversight over expenses, and even improve the overall level of control.

Which banks offer virtual cards?

Many banks offer virtual cards, but not all banks make them easy to use. Historically, these offerings were designed for enterprise level clients, but that’s where Extend comes in. Extend offers banks an easy-to-use virtual card & spend management platform for businesses of all shapes and sizes. Find out if your bank offers Extend with your commercial card program.

Are virtual credit cards secure?

With a virtual credit card, your account number is never shared with the merchant. This makes it much more difficult for outside users to obtain personal information and make unauthorized purchases. In addition, virtual credit cards often come with built-in fraud protection features. For example, you may be able to set limits on how much can be charged to the card or require that a PIN be entered for each transaction. As a result, virtual credit cards provide an extra layer of security for online purchases.

Who should get a virtual credit card?

Virtual credit cards are valuable in B2B contexts, best suited for businesses, corporations, and bank partners looking to meet the expectations of their business clients and the demands of digitized business models. Banks will increase their customer base with this offer, corporations will increase speed and efficiency with at-the-ready payment systems and proactive accounting, and employees will never have to delay a transaction based on slow approvals or a backed-up expense system.

Do virtual cards send separate statements?

Some issuers will send a separate statement for each purchase made with a virtual credit card, while others will send a single statement that includes all of the card's transactions. Regardless of the issuer, however, all virtual credit cards will show up on your regular credit card statement. This means that you can easily keep track of your spending without having to worry about losing or misplacing a physical credit card.