What's an Online Credit Card and How Does it Work?

Tara Seboldt
Aug 23, 2022

The internet makes it easy to buy almost anything you want. From ordering pizza delivery for dinner or buying a specialty product from across the world, online purchases are fast and convenient.

Credit card companies are making online purchases even more convenient with the introduction of online credit cards.

This article goes over how these virtual cards work, as well as the common benefits and disadvantages of using an online card.

The Differences Between a Physical and Online Credit Card

An online credit card—or virtual credit card—is a randomly-generated credit card number linked to a credit card account. They’re usually used to mask the number of a physical credit card when you’re making a purchase online.

For example, you’re buying shoes from a website you’ve never used before. You can use an online card number linked to your physical credit card to make your purchase more secure.

In the event of a data breach, hackers wouldn’t get access to your real credit card number—only your one-time virtual card number.

Some credit card issuers will also give you a virtual card number to use while you're waiting for your physical card to arrive. This can be the same number as the physical card or one that expires once you activate your physical card.

The biggest difference between an online card and a physical card is having access to the actual plastic card. You can take your physical card to a store and swipe or tap it to pay at checkout.

Virtual cards are designed for use online or over the phone since you don’t physically have a card to swipe.

Is a Virtual Card the Same as a Digital Wallet?

No. While virtual cards and digital wallets are similar, they have one big difference.

A virtual card is a completely new set of card numbers—including the expiration date and security code.

Digital wallets (like Apple Pay and Google Pay) hold a digital copy of your physical credit card. The card number and security details are the same as your physical card.

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How Do Online Credit Cards Work?

Since virtual cards are linked to credit card accounts, your online card works the same as your physical card.

Different credit card issuers offer cardholders different ways to use virtual cards. For instance, some let you generate one-time card numbers that are invalid after a single purchase. Others let you create card numbers for ongoing purchases, such as a card number for your Netflix subscription.

Cardmembers with business credit cards might also be able to create virtual credit cards for employees.

This lets you authorize an employee to purchase up to a set credit limit without opening a new card.

Building Credit

Online card numbers can help you build credit just like your physical credit card. When you purchase with a virtual number, the transaction shows up on your credit card statement.

Making on-time credit card payments—whether you use your card in person or virtually—can help you build a positive credit history. As you pay your bill on time, your credit score should go up over time.

Rewards Programs

Using an online card linked to your rewards credit card lets you earn rewards on your virtually-made purchases.

Let’s say you use a virtual card to pay for a new kitchen appliance. Your physical card earns cash back on every dollar you spend. Even though you used a virtual number, your card will still earn rewards.

You can usually even use your cash back rewards as a statement credit to offset the cost of your new appliance! Or, you can purchase gift cards with the rewards.

Credit Card Fees

Most credit card issuers let you use a virtual card number with no extra charge. However, it’s always a good idea to double-check with your credit card before creating an online card number.

Even if the virtual number is free, your online card will still be subject to the same fees as your physical card.

For example, your card charges a 3% foreign transaction fee for international purchases. You buy your favorite international snacks from Europe using a virtual number. Your purchase still includes the foreign transaction fee.

You might face credit card late fees if you miss your payment due date. Missing a payment or not making the minimum payment could also hurt your credit score.

Other common fees include balance transfer fees, cash advance fees, and annual fees.

Mobile Apps

Just like an online banking app for a savings account, most credit card companies offer mobile apps for card members.

These apps usually let you view statements, pay bills, and request a credit line increase.

Some companies even let you generate a virtual card number right in the app.

Are Online Credit Cards Safe?

Yes, online credit cards are an even safer way to use your credit card.

Most credit card transactions have protections, such as using an encrypted chip with a physical card. When buying online, however, you might worry about data breaches or hackers getting your card number.

Virtual card numbers help reduce your risk of having credit card data stolen by using a completely new number.

Are Online Credit Cards Instant?

Most credit cards let you generate and use a virtual card number instantly.

If you don’t already have a credit card, however, you’ll need to look for credit cards that offer instant use. Instant-use cards give you access to your credit account immediately after approval. This is usually in the form of a virtual card number to use for online purchases.

Note that instant use is different from instant approval. Instant approval simply means your credit card company will open a new account based on creditworthiness.

You’ll still have to wait for your physical card to arrive before making purchases. Cards usually come within a few days of account opening, but it could be up to several weeks.

Online Instant Credit Card Offers

Credit cards with instant use sometimes have welcome offers to entice new cardholders. These offers are usually a form of bonus rewards or an introductory APR.

Rewards welcome offers might be bonus points, bonus miles, or travel credit. Or, you might be eligible for a statement credit if you make enough eligible purchases in the first three months.

An intro rate offer, on the other hand, helps reduce the amount of interest you’ll pay on credit card purchases. Intro rates usually offer an intro APR for a while before converting back to a variable APR.

For example, you sign up for a card with an introductory interest rate of 0% for the first year. You won’t pay interest on your purchases (both virtual and in-person) for the first 12 billing cycles.

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Pros and Cons of Virtual Credit Cards

Most people have a positive outlook on virtual cards. They provide a safe way to pay online. However, there are still advantages and disadvantages to using an online credit card.


  • Make secure payments: Easily pay for things online or over the phone without the risk of a stolen credit card.
  • Transactions post to account: Like physical purchases, you’ll see your virtual payments on your credit card statement.
  • Set spending limits: Many card issuers let you set a dollar amount limit for virtual cards, further limiting your risk if the card is stolen.
  • Easy to replace: You can usually go onto your mobile app or online credit card account to easily create new virtual card numbers.


  • Not for in-person purchases: Online credit cards won’t help you make purchases at the gas station, grocery store, or other in-person stores.
  • Complicates purchase validation: Purchases that require in-person validation—like flights or car rentals—get more complicated with virtual numbers. You may have to call your credit card company to help verify the purchase.

The Bottom Line

Using a virtual credit card number can be an easy and safe way to pay online or over the phone.

Just like a physical card, be sure you understand the disclosures for your virtual card. This includes fees, billing cycles, and minimum payment requirements.

Tara Seboldt

Tara is a financial writer with over five years of professional writing experience. She previously worked at a financial planning firm. Tara uses this professional experience to help readers better understand their finances and make smart financial moves. When she’s not writing about money, Tara enjoys spending time in the Idaho mountains hiking, camping, and skiing.

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