A Look At Single-Use Credit Cards

They offer another layer protection against fraud, but are not foolproof

Identity theft and other types of fraud related to the use of credit cards is a way of life these days. Individual and large corporations alike have all been the victims of such crimes. With well-publicized breaches in online security at major companies, consumers are forced to search for better ways to protect their sensitive financial information.

These types of issues have lead shoppers to look into safer alternatives such as single-use credit cards. They offer a more secure way to shop online, but are not without their downsides.

Key Takeaways

  • Single-use credit cards—also called virtual credit cards—are designed to make online shopping safer.
  • These cards provide various alias numbers for the same account, typically your existing credit card account, so your real account number is never revealed to the merchant.
  • Virtual credit cards cannot be used for in-store purchases, including those that require you to show your card at the time of pick-up, which can make renting a car or returning items difficult.

What Are Single Use-Credit Cards?

Single-use credit cards—also called virtual or disposable credit cards—were created with the goal of making online shopping safer. They provide various alias credit card numbers for the same account, typically your existing credit card account. In this method, your real account number is never revealed to the merchant. For example, if you use a single-use card for your medical bills, your auto payment, and your wine of the month club membership, a different account number would be used for each of those vendors, but all of the numbers would be linked to the same base account.

Single-use account numbers are generated through your financial institutions' website or through downloaded software, such as a mobile app or browser extension The account numbers can be used to make purchase online, and in some cases for telephone orders.

Single-use credit cards have been around since the early 2000s. American Express and Discover were among the first to offer the service. Discover stopped offering these cards in 2014 and American Express in 2004. Amex currently offers American Express Go, a virtual card, for some of its corporate cards. Capital One and Citibank are currently the two major card issuers that offer virtual credit cards.

While single-use cards add another layer of protection, they are not foolproof. You should always take basic steps to make yourself less vulnerable to fraud.

Advantages of Single-Use Credit Cards

Single-use credit cards cut down on identity theft because your real account number is never revealed during a transaction. Because there is no physical card, they cannot be stolen. Also, you can set a limit on how much money is on the card and an expiration date for how long the card can be used (typically up to 12 months).

For instance, if you put a $100 limit on the card, that is all that could be spent if the card were somehow compromised. In addition, a thief would only be able to use a given number for a specific merchant, which would limit the ability to make purchases on your account.

Another important use of single-use credit cards is to ensure something a consumer only wants to use for a shorter period isn’t auto-renewed. For example, you might want an online or a magazine subscription to last only three months during a promotional rate. A single-use credit card can expire before the promotion is over, which offers additional assurance it is not going to auto-renew without your intervention.

Disadvantages of Single-Use Credit Cards

Single-use cards cannot be used for in-store purchases, including those that require you to show your card at the time of pick-up, because the number on your physical card and the number used to make the purchase will not match. This can also pose a problem if you need to return an item. Because the number for the purchase doesn't match your card, the same problem goes for car rentals.

Another downside is that single-use account numbers only last for a limited time, so you have to update them constantly—for example, to maintain automatic bill payments.

Other Reasons to Use Single-Use Credit Cards

Despite their limitations, single-use credit cards can be a viable option in the fight against credit card fraud, which continues to grow at a rapid pace. Consider the data: There were 393,207 incidents of credit card fraud reported to the Federal Trade Commission (FTC) in 2020, a significant increase from the 271,917 reported in 2019. The FTC cited credit card fraud as the most frequent type of identity theft in 2020.

Article Sources
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  1. American Express. "American Express Go."

  2. Citi. "Virtual Account Numbers."

  3. Capital One. "What Is a Virtual Card Number & How Does It Work?"

  4. Federal Trade Commission. “Data Book 2020,” Page 15.

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