Virtual cards, also known as “burner cards” come from the corporate world where credit cards facilitate procurement payments. They solve the problem of putting out a large company’s credit cards into the market, which could have $50,000+ in available credit. Imagine the exposure of a vendor who deals with Fortune 500 companies, and a rogue employee who would have access to all large accounts credit lines.
Enter virtual cards. Companies such as Bank of America and Citi pioneered the concept of shielding business credit card numbers with a psuedo number, referred to in the industry as a“virtual card”. In this function, a procurement manager can sign into the account and create a valid one-time-use account (or a variation that expires at a certain time or amount). Armed with this shielded account, they can transact as they normally would but with certainty that risk would be limited.
With so many recent breaches, some card issuing companies perceive a business opportunity. We wonder if it is worth all the fuss. Consumers in most markets have excellent protections. Both MasterCard and Visa offer “Zero Liability” programs, and of course, in the US, we have Regulation E, which limits fraud risk as long as you were not part of the problem. Most other countries have similar protections.
Today we see card companies focused on the ability to create virtual cards for consumers. In contrast to issuers who had existing infrastructure for commercial accounts and just ported the function over, such as Bank of America and Citi, these fledging card issuers center their business on the burner card as a security feature.
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Don’t Trust Merchants With Your Credit Card Info? Use A Burner
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And every site that has your credit card info represents another potential gold mine for hackers to try and crack into.
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The concept works like a throwaway prepaid cell phone—you can link your bank account to the generated card, use it once, and then it’s gone, so that the merchant never actually sees your actual financial information and hackers can’t get it by attacking them.
Consumers will have to sort out whether the appeal to FUD (Fear, Uncertainty and Doubt) is worthwhile. In most cases, given the protections we discussed above, this is not necessary.
With my consumer, rather than analyst, hat on, I would say that if you thought you needed a burner card, you are probably shopping somewhere that you should not.
There is always Amazon to fall back on, which outside the scope of where using a burner card would make sense. The one use case that makes sense to me is if I were buying my wife a present and wouldn’t want her to know where because it would ruin the surprise, such as a purchase from Tiffany’s.
However, for most other transactions, I would either avoid a merchant I did not trust, use PayPal, or fall back on good old Amazon.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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