Running a business today means a lot of your spending happens online, from SaaS tools to services like advertising. But if you’ve ever dealt with a lost or compromised physical card, you know how much of a hassle they can be.
That’s where virtual debit can make a huge difference.
A virtual debit card lets organizations securely make both online purchases and in-person payments via digital wallets—all without the use of a physical card. Businesses can also create multiple unique cards, use them instantly, and even apply spending controls.
In this article, we guide you through what virtual debit cards are, how they work, as well as their benefits and drawbacks.
What Is A Virtual Debit Card?
A virtual debit card is a digitally issued card with its own debit card number, expiry date, and CVC. These cards exist only in electronic form and serve for online transactions and in-person purchases.
They are a convenient choice for businesses that want to monitor and manage their spending while making secure purchases. Although primarily used to buy goods and services online, you can also add them to your Apple Wallet or Google Pay for in-person purchases, too.
What’s The Difference Between Virtual Cards and Digital Cards?
It’s easy to mix up virtual cards and digital cards—they sound so similar, right? But the key difference is actually important to know for your business.
Virtual cards exist purely in electronic form—there’s no tangible card. Digital cards, on the other hand, are electronic versions of physical cards.
How Do Virtual Debit Cards Work?
Virtual debit cards operate, overall, like physical debit cards. They have a 16-digit card number, an expiry date, and a 3-digit CVV code.
Banks, credit unions, and fintech companies issue them to businesses to give more visibility and control over spending, as well as greater security and fraud protection. Some well-known banks that issue virtual cards include American Express, Capital One, and Revolut.
Just like a physical debit card, it links directly to your bank account. This means any purchases you make with a virtual debit card will be deducted from your linked account’s balance.
To make online purchases, all you need to do is input your virtual card’s details and make payment, just like you would with a physical debit card. For in-person purchases, you can add virtual cards to your virtual wallet—such as Apple Wallet or Google Pay—and make contactless payments.
How Secure Are Virtual Debit Cards?
When it comes to security, virtual debit cards are a step ahead of both physical and digital cards. They’re simply used less often, which means fewer chances for things to go wrong—plus, no more worrying about RFID theft or your card getting lost.
Some of the other main reasons these cards are more secure include:
- Additional layers of security: Users can access and use virtual debit cards through either an app that requires authentication or through their digital wallet. Many apps also send real-time notifications or alerts for each transaction.
- Limited exposure of personal information: You can easily create a new card for each recurring purchase, limiting the exposure of your primary account details online and reducing the chance of fraud.
- Protection against physical loss or theft: Since these cards only exist electronically, there’s no risk of theft or physical loss. You can control them via an app, making it easy to freeze them if your phone is stolen.
- Can be temporary or easily deactivated: Many virtual debit cards are for one-time use and automatically deactivate after the transaction is complete.
If the worst-case scenario happens and a virtual card is compromised, the repercussions are smaller and easier to manage. If you’ve only used a virtual card for one service or subscription, then you only need to cancel and set up one new payment method. That’s an easy task because new virtual cards can be generated instantly, without the need to wait for your bank to send a card by mail and then send the PIN afterward.
What Are The Benefits of Using Virtual Debit Cards?
Beyond just top-notch security, virtual debit cards can completely streamline your spending. They automate purchases, cut down on admin time, and keep costs under control across your entire business—from SaaS tools to travel expenses. Not to mention the time and money saved. Priceless.
1. Free Up Time for Finance
A virtual debit card frees up time for your finance team because it automatically tracks payments through an app. You can tie each card to a specific project, budget, or team member. This capability makes it much easier to see exactly how much is being spent, by whom, and on what—saving your finance team hours of chasing down receipts and reconciling line items.
Virtual cards also offer automated spending analytics, so finance teams can better view business-wide expenses and assets. For example, Cledara helped Seatfrog introduce virtual debit cards for every vendor to help streamline software requests, ultimately saving time on difficult tasks.
2. Instant Activation and Use
You can instantly issue a new virtual debit card for each team member, project, agency, or service. As soon as employees receive the card number, they’ll be able to begin making transactions immediately. This is especially beneficial when team members need quick access to funds to make urgent purchases.
Entering the app connected to your card number also lets you swiftly manage, deactivate, and adjust spending controls for the card, making it easy to respond to new purchase demands.
3. Improved Budgeting and Spending Control
A virtual debit card gives your finance team greater control over budgeting and spending by enabling them to set spending limits, track expenses in real time, and even restrict usage to defined categories.
You can customize each card based on the department, project, or employee. Finance teams will also have access to all transactional information, which they can use for financial analysis and audits.
For example, virtual debit cards make it easy to monitor and manage your ongoing SaaS licenses. This level of control allows for proactive budgeting, reduces the chance of overspending, and can even make SaaS governance easy and manageable.
4. Potential for Lower Fees
Virtual debit cards are cheap. Firstly, providers don’t have to worry about manufacturing and shipping costs that frequently come with physical cards—meaning these costs aren’t passed on to you. Secondly, virtual cards typically have lower transaction fees for both online and in-person payments.
With multiple team members using virtual cards instead of physical ones, you can significantly save on card-related expenses, making it a cost-effective option for the entire team.
What Are The Drawbacks of Virtual Debit Cards?
As helpful as they are, these cards also have some downsides. From limited transactions to possible restrictions, here are some of the main drawbacks of these cards.
1. Limited Use for Certain Transactions
While virtual debit cards are incredibly versatile for online and contactless payments, there are a few things to keep in mind. ATMs? Not really their thing. So if your team needs access to cash, they may need another solution in their pocket.
This can cause complications if employees need to take out cash when traveling or if they’re in a place that does not accept contactless payments. If you need to regularly access physical cash in order to make payments, these cards might not be the best option.
2. Dependence on Technology
Virtual debit card transactions entirely depend on digital platforms, apps, and online access, even when you’re using them to make in-person purchases. If employee cardholders encounter issues with their smartphone, such as a dead battery, software malfunction, or loss of a connection, they won’t be able to make purchases.
While these situations can be far and in between, technological difficulties render your card unusable. This can make it unreliable in emergencies or when employees need quick access to company funds.
3. Possible Restrictions or Expiration Periods
Not all virtual debit cards are the same. While some allow for long-term use and let you customize restrictions, others may come with restrictions and expiration periods. Single-use virtual debit cards are great for deterring fraud, but they can be inconvenient if the user suddenly realizes they need to make more transactions.
The pre-programmed restrictions and expiration dates of certain virtual cards make them less than ideal for companies that emphasize flexibility and consistency when it comes to payment options.
Get Virtual Cards For SaaS Payment with Cledara
Virtual debit cards securely and conveniently allow you to make transactions online and in person. They give you greater visibility into transactions and work perfectly for businesses making purchases on a case-by-case basis, such as with SaaS tools.
Take Cledara virtual debit cards as an example.
They're just like regular cards, except you access your details through the Cledara platform, making them secure for online purchasing. Cledara’s cards are also debit—which more merchants accept—meaning you can use them in more places.
