What Are Electronic Payment Methods and How Do They Work?

Monday, October 10th, 2022
Updated: October 10th, 2022
The content is accurate at the time of publication and is subject to change.

If you frequently make online payments but remain concerned about your sensitive bank account details, virtual credit card or digital wallet services can give you the added layer of protection you need.

A virtual credit card (VCC) is an online only version of your debit or credit card. It’s not a physical card, but a randomly generated, unique 16-digit number connected to your real card. These numbers are temporary, have their own expiration date and security code, so you can use more than one. However, at the same time, charges that you make with a virtual credit card appear on your credit card statement like any other charge you make with your regular credit card.

Benefits of virtual credit cards

Virtual credit cards minimize the damage hackers can do if they gain access to your credit card number and help you avoid the hassle of a compromised account.

In case criminals steal your virtual account number, the same protections are in place as with traditional credit cards. That limits your potential liability for fraudulent purchases, as most card issuers have a zero-liability policy for consumers.

Virtual credit card numbers can also serve as a defense against companies that try to charge you for unintentional purchases, such as automatic subscription renewals.

Drawbacks of virtual credit cards

To use a virtual card, you have to do some work beforehand. You should contact your card issuer and request a new number each time you want to make a purchase. You may also not be able to save your card information with the merchant for quicker verification during checkouts in the future.

Another potential drawback is that you may run into difficulties if you need to return an item purchased with a virtual credit card. If the card number has already expired by the time you try to make the return, you may have to go through a few extra steps to make a return.

How to get a virtual credit card?

Depending on the credit card issuer, the process of getting a virtual credit card may differ slightly. But in general, getting a virtual credit card is fast and simple, assuming you already have a physical credit card. Most major credit card issuers now have virtual credit card options that you can add on to your existing account but check with your credit card issuer first to make sure they offer this.

If you want to simplify how you make payments and not to rely on physical cash and credit cards, you may want to use a digital wallet, also known as an electronic wallet, e-wallet or, when used on your phone, mobile wallet.

Like a virtual credit card, a digital wallet moves payments online that protects users’ banking information and passwords and allows them to make safe transactions online, in apps, in stores and even at ATMs.

Pros of Digital Wallets

The variety of e-wallets to choose from enables anyone to find the right wallet for their needs and the resources to make sure they handle their wallet safely and securely. There are even digital wallets for consumers who own cryptocurrency.

Even if somebody steals your phone, the thief will still need a passcode or biometric authentication to access the information in a digital wallet. You may also be able to lock your mobile wallet from another device if you lose your phone.

Other important features include data encryption and a record of all your transactions, so you can easily keep track of your spending.

Cons of Digital Wallets

Although there are a lot of different digital wallets, they can’t completely replace your actual physical wallet. Some digital wallets are more widely accepted than others. Also, merchants need to acquire specialized hardware and software to accept digital wallet payments.

If you lose, break, or forget to charge your phone, you won’t have access to your digital wallet. Unlike a physical card, if you lose the information stored in your mobile wallet, you might not be able to get it back.

Digital payments are quick, easy, and usually automatic since you enter your account information one time and never need to again. Having easier access to your cards can encourage overspending because you constantly have your digital wallet at your disposal.

Most e-wallets are free, but you might come across some fees. Be sure to do some research on all the potential fees prior to start using a digital wallet.

Overall, there is no one-size-fits-all option, different types of electronic cards and wallets serve different functions and have different strengths. So, figure out what’s important to you – security, user experience, whatever and then work from there.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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