Online virtual debit cards, explained

Many consumers are exploring ways to leave their debit card at home by using an online virtual debit card for both online and in-store purchases.

This article includes tips, suggestions and general information. We recommend that you always do your own research and consider getting independent tax, financial and legal advice before making any important decision.

A virtual debit card is a type of payment method that works just like a traditional debit card. The difference? A virtual debit card only exists in a digital format. Here's what to know.

How do virtual debit cards work?

A virtual debit card operates similarly to a traditional debit card. That means it includes the same 16-digit debit card number, expiration date, and CVV number.

While there won't be a physical card, it’s still possible to pay in-person with a virtual debit card. The online virtual debit card details can be added to a digital wallet on a smartphone, giving people the option to pay with a tap or QR code at retailers that offer contactless payment methods.

The difference between virtual cards and digital cards

The terms ‘virtual cards’ and ‘digital cards’ can sometimes be used interchangeably, even though they mean different things.

• Virtual cards can be issued digitally and exist in electronic form. No physical version of the card will be available to use.
• Digital cards are the digital version of a physical card and are issued as part of the physical card process. Physical cards can be kept in a wallet, and the digital card can be stored in a digital wallet. Both use the same linked account.

Things to consider if applying for a virtual debit card

There are important factors to consider before applying for a virtual debit card. Everyone’s financial situation is different, and there are various reasons someone might apply for one.

Useful factors to consider include: if a bank offers this type of card, if there are fees and other associated costs involved, how the card will be used and for what, mobile wallet compatibility, and if there’s the ability to set spending limits.

There may be other factors someone wants to consider and these may vary depending on their individual needs.

How to get an online virtual debit card

The process for applying, getting, and using a virtual debit card can vary depending on the issuer. Account fees, overdraft fees, interest, and other costs may apply, so it’s important to read and understand any terms and conditions.

An example of how to get an online virtual debit card is below:

Through a digital bank

Some digital banks offer virtual debit cards. Typically, a potential customer would open an account with the digital bank first. The process for opening an account may vary depending on the bank, but it normally includes providing information such as: full name, date of birth, residential address, mobile number, email address, and proof of identity. A minimum balance could be required and fees may apply.

Then, depending on the bank, type of account, and available features, a customer may be able to get a virtual card associated with their existing account.

In some cases, more than one virtual card can be generated once an account is created. In other cases, customers may need to apply for a physical card to get virtual card access. Fees and other costs may apply.

Potential benefits of virtual debit cards

Virtual debit cards can be a good option for people who don't want to carry a physical card or are looking for ways to shop online and with their smartphone.

Here are some potential benefits of virtual debit cards:

• Convenience. Virtual cards linked to an existing or new account can normally be generated quickly, so users can start spending without having to wait for a physical card to arrive in the mail.
• Lower fees. Because they are usually easier to administer by banks and online providers, virtual debit cards can sometimes carry lower fees than those of a traditional card.
• Security. Virtual debit cards typically can't get physically lost or stolen like physical cards. They can also offer safety measures such as two-factor authentication if a customer has this enabled.
• Control. Some virtual debit cards let customers set spending limits, potentially helping them to stay in control of their spending and on top of their budget.

Potential cons of virtual debit cards

It's important to consider the potential drawbacks of virtual debit cards. Some examples include:

• Functionality. Virtual debit cards may not come with the same functionality as physical debit cards.
• Fees: Account fees, overdraft fees, interest, and other costs may be associated with a virtual debit card.
• Availability: Some online merchants may not accept a virtual debit card as a payment type.