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Virtual credit cards vs. physical credit cards: Which is right for your business?

Virtual Card Spend
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Today’s business landscape moves fast, and adaptability is critical for achieving market success. Is your business prepared to thrive in this digital-first environment?

If you’re still managing payments with a handful of physical credit cards, it might be time to reevaluate your financial tools and ensure they align with your business goals. 

Especially since the payment options available today are more diverse than ever. 

One option that has been gaining popularity in recent years is the virtual credit card — an innovative payment method that adapts to a company's spending needs in real-time, enhances security protocols, and integrates seamlessly with financial software. 

Virtual cards are more than just a digital extension of the plastic card already in your pocket; they’re a strategic financial tool designed to give your business a competitive edge. 

And they’re here to stay, with their popularity and usage only growing in the coming years. In fact, the global market size for virtual cards is expected to grow to $65 billion USD by 2030, a compound annual growth rate of 21%.

How do virtual credit cards work? 

Virtual credit cards offer a modern approach to making and managing business transactions. 

Unlike physical cards, virtual cards don't exist in a tangible form. Instead, they’re generated electronically through a secure virtual card app you can use on your phone or desktop. 

Each virtual card you create gets its own unique card number, expiration date, and security code, much like a physical card. However, these details are designed for single or limited use, significantly reducing the risk of fraud or misuse.

Although virtual cards only exist digitally, they work just like traditional credit cards. You can use them to pay for goods and services online, over the phone, or in person, wherever contactless payments are accepted. 

The great thing about virtual cards is that they’re highly customizable, allowing you to set spending limits, define expiration dates, and even designate them to specific vendors, departments, employees, and locations. 

You can create single-use cards for one-time payments or auto-refill cards for recurring transactions. Once the set parameters are met, or the cards expire, they become inactive, adding an extra layer of security.

Comparing virtual vs. physical credit cards

While both virtual and physical credit cards facilitate payments, there are several distinctions between the two.

Let’s go over their differences in more detail.

Security: Fraud safeguards and overcharge protection

In terms of security, virtual cards offer a significant advantage over physical cards. This is because virtual cards mask your real account information and hold unique card details, greatly minimizing the risk of fraud and overcharging. 

On the other hand, physical credit cards, while equipped with standard security measures like chip and PIN technology, are more vulnerable to physical theft, cloning, and misuse. Once the card details are compromised, it can lead to unauthorized transactions until the card is blocked or canceled, which is time-consuming and inconvenient. 

Convenience: Transaction categorization and pre-tagging for smooth reconciliation

With virtual cards, you can seamlessly categorize and pre-tag transactions and automatically assign them to the appropriate spend category, such as travel, office supplies, or marketing expenses. This automatic categorization eliminates the need to enter data manually and after transactions have already taken place, significantly streamlining the reconciliation process as payments occur and not at month's end. 

The process differs significantly when using physical cards. This typically entails handling stacks of receipts and statements that demand manual sorting and categorization. Waiting to categorize transactions until the end of the billing cycle often leads to discrepancies and presents challenges in achieving accurate and timely expense reconciliation. These issues can ripple through various aspects of your business’s operations, affecting overall efficiency and financial accuracy.

Control: Oversight of vendor-related spend 

Virtual cards excel in controlling spend, thanks to the ability to set specific limits and create cards for designated vendors or expenses. This level of customization ensures expenses always align with company policies, remain within budget, and prevent fraud or misuse. 

In contrast, although physical credit cards do provide basic control mechanisms, such as credit limits, they lack the ability to fine-tune limits for particular transactions or vendors. This often leads to challenges in expense monitoring and increases the risk of financial misuse, especially in larger organizations. 

Efficiency: Accounts payable automation and expense management

Virtual cards offer a powerful advantage in accounts payable automation and expense management. By creating virtual cards categorized by vendor or spend type, you can pre-tag all transactions with valuable metadata. Doing so helps automate reconciliation while granting you access to detailed reporting and real-time expense tracking.

Taking this approach streamlines the accounting process and reduces the likelihood of manual entry errors, enhancing financial accuracy and reliability in your business. On the other hand, physical cards often require a manual and labor-intensive process for tracking and reconciling expenses, particularly in companies with high transaction volumes. 

Case study: Implementing virtual credit cards in business

Let’s take a closer look at how implementing virtual cards can transform business operations through the lens of one of our customers, JPL, a full-service marketing agency.

Before adopting Extend, JPL faced a significant challenge when managing high-volume media spending for its diverse client base. 

Their initial approach, relying on a single corporate credit card to manage spending across multiple ad platforms and approximately 40 client accounts, didn’t just lead to stress but also a cumbersome and potentially error-prone reconciliation.

Each month, the finance team was burdened with manually matching transactions to each client account, a difficult task, as ad platforms tend to process multiple and identical payments simultaneously across different campaigns, making it almost impossible to distinguish which payment belongs to each client. 

As a result, the finance team spent countless hours cross-referencing reports with credit card charges. Budget overruns and delayed payments became more prominent.

Jillian Barrick, JPL’s director of finance, told us their initial approach was unsustainable, “It never matched perfectly and required a lot of manual effort, which might result in errors that could’ve been easily avoided.”

In search of a more efficient solution, JPL implemented Extend’s spend management platform to streamline this process with the power of virtual cards.

This meant:

  • Creating a distinct virtual card for every client account to organize and consolidate payments per client spend;
  • Setting spending limits and custom expiration dates per card, so spending could be easily regulated while preventing budget overruns or unauthorized use of funds; and
  • Monitoring spending in real-time to better understand how client budgets are spent, as payments occur, not at month's end.

The results…

  • Complete visibility and better organization over every campaign charge and client media budgets
  • No more overages thanks to increased control over funds 
  • Uninterrupted payments by assigning virtual cards to different clients and ad platforms 
  • Money, time, and resources saved by automating reconciliation 

JPL’s spend management success story is a testament to the impact of virtual cards on a business’s financial operations, streamlining processes and offering unprecedented clarity and control over expenses. 

Virtual cards: The future of business spending

As businesses navigate a digital-first landscape, the need for adaptable, secure, and efficient financial tools, like virtual cards, becomes more pronounced. 

Their upward trajectory represents a significant shift in how businesses manage transactions; virtual cards are not a fleeting trend but a fundamental part of the future of finance. 

But don't just take my word for it; take a tour of the platform to experience why more businesses are leveraging virtual cards for better business payments. 

Blog

Virtual credit cards vs. physical credit cards: Which is right for your business?

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Virtual Card Spend
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Share post

Today’s business landscape moves fast, and adaptability is critical for achieving market success. Is your business prepared to thrive in this digital-first environment?

If you’re still managing payments with a handful of physical credit cards, it might be time to reevaluate your financial tools and ensure they align with your business goals. 

Especially since the payment options available today are more diverse than ever. 

One option that has been gaining popularity in recent years is the virtual credit card — an innovative payment method that adapts to a company's spending needs in real-time, enhances security protocols, and integrates seamlessly with financial software. 

Virtual cards are more than just a digital extension of the plastic card already in your pocket; they’re a strategic financial tool designed to give your business a competitive edge. 

And they’re here to stay, with their popularity and usage only growing in the coming years. In fact, the global market size for virtual cards is expected to grow to $65 billion USD by 2030, a compound annual growth rate of 21%.

How do virtual credit cards work? 

Virtual credit cards offer a modern approach to making and managing business transactions. 

Unlike physical cards, virtual cards don't exist in a tangible form. Instead, they’re generated electronically through a secure virtual card app you can use on your phone or desktop. 

Each virtual card you create gets its own unique card number, expiration date, and security code, much like a physical card. However, these details are designed for single or limited use, significantly reducing the risk of fraud or misuse.

Although virtual cards only exist digitally, they work just like traditional credit cards. You can use them to pay for goods and services online, over the phone, or in person, wherever contactless payments are accepted. 

The great thing about virtual cards is that they’re highly customizable, allowing you to set spending limits, define expiration dates, and even designate them to specific vendors, departments, employees, and locations. 

You can create single-use cards for one-time payments or auto-refill cards for recurring transactions. Once the set parameters are met, or the cards expire, they become inactive, adding an extra layer of security.

Comparing virtual vs. physical credit cards

While both virtual and physical credit cards facilitate payments, there are several distinctions between the two.

Let’s go over their differences in more detail.

Security: Fraud safeguards and overcharge protection

In terms of security, virtual cards offer a significant advantage over physical cards. This is because virtual cards mask your real account information and hold unique card details, greatly minimizing the risk of fraud and overcharging. 

On the other hand, physical credit cards, while equipped with standard security measures like chip and PIN technology, are more vulnerable to physical theft, cloning, and misuse. Once the card details are compromised, it can lead to unauthorized transactions until the card is blocked or canceled, which is time-consuming and inconvenient. 

Convenience: Transaction categorization and pre-tagging for smooth reconciliation

With virtual cards, you can seamlessly categorize and pre-tag transactions and automatically assign them to the appropriate spend category, such as travel, office supplies, or marketing expenses. This automatic categorization eliminates the need to enter data manually and after transactions have already taken place, significantly streamlining the reconciliation process as payments occur and not at month's end. 

The process differs significantly when using physical cards. This typically entails handling stacks of receipts and statements that demand manual sorting and categorization. Waiting to categorize transactions until the end of the billing cycle often leads to discrepancies and presents challenges in achieving accurate and timely expense reconciliation. These issues can ripple through various aspects of your business’s operations, affecting overall efficiency and financial accuracy.

Control: Oversight of vendor-related spend 

Virtual cards excel in controlling spend, thanks to the ability to set specific limits and create cards for designated vendors or expenses. This level of customization ensures expenses always align with company policies, remain within budget, and prevent fraud or misuse. 

In contrast, although physical credit cards do provide basic control mechanisms, such as credit limits, they lack the ability to fine-tune limits for particular transactions or vendors. This often leads to challenges in expense monitoring and increases the risk of financial misuse, especially in larger organizations. 

Efficiency: Accounts payable automation and expense management

Virtual cards offer a powerful advantage in accounts payable automation and expense management. By creating virtual cards categorized by vendor or spend type, you can pre-tag all transactions with valuable metadata. Doing so helps automate reconciliation while granting you access to detailed reporting and real-time expense tracking.

Taking this approach streamlines the accounting process and reduces the likelihood of manual entry errors, enhancing financial accuracy and reliability in your business. On the other hand, physical cards often require a manual and labor-intensive process for tracking and reconciling expenses, particularly in companies with high transaction volumes. 

Case study: Implementing virtual credit cards in business

Let’s take a closer look at how implementing virtual cards can transform business operations through the lens of one of our customers, JPL, a full-service marketing agency.

Before adopting Extend, JPL faced a significant challenge when managing high-volume media spending for its diverse client base. 

Their initial approach, relying on a single corporate credit card to manage spending across multiple ad platforms and approximately 40 client accounts, didn’t just lead to stress but also a cumbersome and potentially error-prone reconciliation.

Each month, the finance team was burdened with manually matching transactions to each client account, a difficult task, as ad platforms tend to process multiple and identical payments simultaneously across different campaigns, making it almost impossible to distinguish which payment belongs to each client. 

As a result, the finance team spent countless hours cross-referencing reports with credit card charges. Budget overruns and delayed payments became more prominent.

Jillian Barrick, JPL’s director of finance, told us their initial approach was unsustainable, “It never matched perfectly and required a lot of manual effort, which might result in errors that could’ve been easily avoided.”

In search of a more efficient solution, JPL implemented Extend’s spend management platform to streamline this process with the power of virtual cards.

This meant:

  • Creating a distinct virtual card for every client account to organize and consolidate payments per client spend;
  • Setting spending limits and custom expiration dates per card, so spending could be easily regulated while preventing budget overruns or unauthorized use of funds; and
  • Monitoring spending in real-time to better understand how client budgets are spent, as payments occur, not at month's end.

The results…

  • Complete visibility and better organization over every campaign charge and client media budgets
  • No more overages thanks to increased control over funds 
  • Uninterrupted payments by assigning virtual cards to different clients and ad platforms 
  • Money, time, and resources saved by automating reconciliation 

JPL’s spend management success story is a testament to the impact of virtual cards on a business’s financial operations, streamlining processes and offering unprecedented clarity and control over expenses. 

Virtual cards: The future of business spending

As businesses navigate a digital-first landscape, the need for adaptable, secure, and efficient financial tools, like virtual cards, becomes more pronounced. 

Their upward trajectory represents a significant shift in how businesses manage transactions; virtual cards are not a fleeting trend but a fundamental part of the future of finance. 

But don't just take my word for it; take a tour of the platform to experience why more businesses are leveraging virtual cards for better business payments. 

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Frequently asked questions about virtual credit cards for business

Why should I use a virtual card over a physical credit card?

Opting for a virtual card over a physical credit card can enhance the way you manage business expenses. Virtual cards offer a secure and scalable solution for delegating spending power without the risks associated with sharing physical cards. Virtual cards provide security features, customizable spending limits, and the ability to generate cards for specific transactions or vendors, ensuring greater control and visibility over expenses. This makes them ideal for online purchases and streamlined expense management. While physical cards are necessary for certain in-person transactions, virtual cards offer a more controlled and efficient way to handle the majority of business-related expenses.

What’s the difference between a credit card and a virtual card?

A virtual card is an extension of your existing physical corporate card; therefore, as the name suggests, it only exists online. Depending on your virtual card platform, you can create as many virtual cards as you wish, each with unique card details and spend limit parameters like credit limits and activity dates. Traditional credit cards are physical and can be used online and in person, but they only offer spend limit parameters on the card as a whole.

Are virtual cards accepted everywhere?

Virtual cards are accepted by online retailers and can also be used in physical stores that support contactless payments via digital wallets. However, some places, like certain hotels and car rental agencies, may still require a physical card at the time of payment.

Can I use a virtual card at an ATM?

While it's true that some ATMs now support contactless payments via mobile devices, virtual cards are typically restricted from ATM use due to backend limitations set by the card provider. Virtual cards are designed primarily for online, over-the-phone, and in-person transactions where contactless payments are accepted. This ensures secure and controlled use of the card in line with its intended digital-first purpose.

Are virtual cards safer than physical cards?

Yes, virtual cards offer enhanced security compared to physical cards, thanks to their unique features. They safeguard your real account details using distinct, temporary card numbers for each transaction or card. Additionally, you can tailor the spending limits and expiration dates of each virtual card. This customization adds an extra layer of security and significantly reduces the risk of fraud, misuse, and unauthorized charges, making virtual cards a more secure option for managing financial transactions.

Can you use a virtual credit card in person?

Depending on your card issuer, you can use virtual cards for in-person transactions at establishments that support contactless payments. To do this, add your virtual card to your smartphone's digital wallet. This enables you to make purchases by tapping your phone at contactless payment terminals, offering a convenient and secure way to shop without needing a physical card.

Can I have both a virtual and physical card? 

You can have both a physical and a virtual or multiple virtual cards. In fact, to create virtual cards, you typically need an existing physical card. For instance, a company might issue a physical corporate card to a manager or executive. From this primary card, virtual cards can be generated and distributed to other employees within the organization. This setup allows broader access to company funds without issuing multiple physical cards. Employees who receive virtual cards can then use them to charge business expenses, even if they don't have the physical card themselves.

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Virtual credit cards vs. physical credit cards: Which is right for your business?

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Today’s business landscape moves fast, and adaptability is critical for achieving market success. Is your business prepared to thrive in this digital-first environment?

If you’re still managing payments with a handful of physical credit cards, it might be time to reevaluate your financial tools and ensure they align with your business goals. 

Especially since the payment options available today are more diverse than ever. 

One option that has been gaining popularity in recent years is the virtual credit card — an innovative payment method that adapts to a company's spending needs in real-time, enhances security protocols, and integrates seamlessly with financial software. 

Virtual cards are more than just a digital extension of the plastic card already in your pocket; they’re a strategic financial tool designed to give your business a competitive edge. 

And they’re here to stay, with their popularity and usage only growing in the coming years. In fact, the global market size for virtual cards is expected to grow to $65 billion USD by 2030, a compound annual growth rate of 21%.

How do virtual credit cards work? 

Virtual credit cards offer a modern approach to making and managing business transactions. 

Unlike physical cards, virtual cards don't exist in a tangible form. Instead, they’re generated electronically through a secure virtual card app you can use on your phone or desktop. 

Each virtual card you create gets its own unique card number, expiration date, and security code, much like a physical card. However, these details are designed for single or limited use, significantly reducing the risk of fraud or misuse.

Although virtual cards only exist digitally, they work just like traditional credit cards. You can use them to pay for goods and services online, over the phone, or in person, wherever contactless payments are accepted. 

The great thing about virtual cards is that they’re highly customizable, allowing you to set spending limits, define expiration dates, and even designate them to specific vendors, departments, employees, and locations. 

You can create single-use cards for one-time payments or auto-refill cards for recurring transactions. Once the set parameters are met, or the cards expire, they become inactive, adding an extra layer of security.

Comparing virtual vs. physical credit cards

While both virtual and physical credit cards facilitate payments, there are several distinctions between the two.

Let’s go over their differences in more detail.

Security: Fraud safeguards and overcharge protection

In terms of security, virtual cards offer a significant advantage over physical cards. This is because virtual cards mask your real account information and hold unique card details, greatly minimizing the risk of fraud and overcharging. 

On the other hand, physical credit cards, while equipped with standard security measures like chip and PIN technology, are more vulnerable to physical theft, cloning, and misuse. Once the card details are compromised, it can lead to unauthorized transactions until the card is blocked or canceled, which is time-consuming and inconvenient. 

Convenience: Transaction categorization and pre-tagging for smooth reconciliation

With virtual cards, you can seamlessly categorize and pre-tag transactions and automatically assign them to the appropriate spend category, such as travel, office supplies, or marketing expenses. This automatic categorization eliminates the need to enter data manually and after transactions have already taken place, significantly streamlining the reconciliation process as payments occur and not at month's end. 

The process differs significantly when using physical cards. This typically entails handling stacks of receipts and statements that demand manual sorting and categorization. Waiting to categorize transactions until the end of the billing cycle often leads to discrepancies and presents challenges in achieving accurate and timely expense reconciliation. These issues can ripple through various aspects of your business’s operations, affecting overall efficiency and financial accuracy.

Control: Oversight of vendor-related spend 

Virtual cards excel in controlling spend, thanks to the ability to set specific limits and create cards for designated vendors or expenses. This level of customization ensures expenses always align with company policies, remain within budget, and prevent fraud or misuse. 

In contrast, although physical credit cards do provide basic control mechanisms, such as credit limits, they lack the ability to fine-tune limits for particular transactions or vendors. This often leads to challenges in expense monitoring and increases the risk of financial misuse, especially in larger organizations. 

Efficiency: Accounts payable automation and expense management

Virtual cards offer a powerful advantage in accounts payable automation and expense management. By creating virtual cards categorized by vendor or spend type, you can pre-tag all transactions with valuable metadata. Doing so helps automate reconciliation while granting you access to detailed reporting and real-time expense tracking.

Taking this approach streamlines the accounting process and reduces the likelihood of manual entry errors, enhancing financial accuracy and reliability in your business. On the other hand, physical cards often require a manual and labor-intensive process for tracking and reconciling expenses, particularly in companies with high transaction volumes. 

Case study: Implementing virtual credit cards in business

Let’s take a closer look at how implementing virtual cards can transform business operations through the lens of one of our customers, JPL, a full-service marketing agency.

Before adopting Extend, JPL faced a significant challenge when managing high-volume media spending for its diverse client base. 

Their initial approach, relying on a single corporate credit card to manage spending across multiple ad platforms and approximately 40 client accounts, didn’t just lead to stress but also a cumbersome and potentially error-prone reconciliation.

Each month, the finance team was burdened with manually matching transactions to each client account, a difficult task, as ad platforms tend to process multiple and identical payments simultaneously across different campaigns, making it almost impossible to distinguish which payment belongs to each client. 

As a result, the finance team spent countless hours cross-referencing reports with credit card charges. Budget overruns and delayed payments became more prominent.

Jillian Barrick, JPL’s director of finance, told us their initial approach was unsustainable, “It never matched perfectly and required a lot of manual effort, which might result in errors that could’ve been easily avoided.”

In search of a more efficient solution, JPL implemented Extend’s spend management platform to streamline this process with the power of virtual cards.

This meant:

  • Creating a distinct virtual card for every client account to organize and consolidate payments per client spend;
  • Setting spending limits and custom expiration dates per card, so spending could be easily regulated while preventing budget overruns or unauthorized use of funds; and
  • Monitoring spending in real-time to better understand how client budgets are spent, as payments occur, not at month's end.

The results…

  • Complete visibility and better organization over every campaign charge and client media budgets
  • No more overages thanks to increased control over funds 
  • Uninterrupted payments by assigning virtual cards to different clients and ad platforms 
  • Money, time, and resources saved by automating reconciliation 

JPL’s spend management success story is a testament to the impact of virtual cards on a business’s financial operations, streamlining processes and offering unprecedented clarity and control over expenses. 

Virtual cards: The future of business spending

As businesses navigate a digital-first landscape, the need for adaptable, secure, and efficient financial tools, like virtual cards, becomes more pronounced. 

Their upward trajectory represents a significant shift in how businesses manage transactions; virtual cards are not a fleeting trend but a fundamental part of the future of finance. 

But don't just take my word for it; take a tour of the platform to experience why more businesses are leveraging virtual cards for better business payments. 

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