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What is a virtual debit card?

Learn how virtual company debit cards work and how they benefit your finance teams and employees.

About virtual debit cards

Virtual debit cards are a secure and convenient alternative to shared corporate credit cards. They provide more flexibility and advantages for company spending, while also reducing the risk of fraudulent activity.

Virtual cards can be used for one-time or recurring payments. They offer increased security for online purchases and greater control over company expenses.

How do virtual debit cards work?

Virtual cards are digital payment cards that include the same type of information as a physical debit card, including: card number, expiration date, CVV security code, and cardholder name. The main difference is that virtual cards each come with a completely unique set of card details and a new virtual card number.

With virtual debit cards, employees no longer require a physical card to make purchases. Virtual payment cards also prevent credit card fraud caused by using the same payment method across multiple e-commerce sites. 

Team members can instantly generate new virtual cards online, with individual spending limits pre-approved by their managers. This means employees can make autonomous purchase decisions in their roles, while employers stay in control of how much can be spent.

Virtual debit cards vs virtual credit cards

Virtual debit cards, like physical debit cards, don't use lines of credit. ATM withdrawals, payments and money transfers using debit cards pull from existing funds within a company bank account. 

Virtual debit cards offer businesses more control than physical debit cards with preloaded budgets and spending limits. Funds are managed through a spend platform instead of a bank account, eliminating the risk of overdraft.

With all credit cards, spend activity and debt can affect the cardholder's or company's credit score, adding another element that finance teams need to monitor.

Both virtual card types offer a safer alternative to plastic cards for online shopping, by generating a unique credit card number for every transaction.

Types of virtual debit cards

Virtual debit cards come in two different formats: 

  • Single-use cards:ideal for one-time online payments

  • Recurring cards:designed for subscriptions and other recurring payments

Single-use cards offer strong protection against credit card fraud and phishing. They're especially useful for shopping on e-commerce sites like Amazon. After one use, the virtual card number, CVV, and other card information expire so the virtual card is no longer valid for any future purchases. Like physical cards, a single-use card is deactivated after it reaches its expiry date, even if it hasn't been used.

Recurring-use virtual cards are used for ongoing charges and subscriptions. Each card can only be assigned to one specific vendor and payments can be set according to the frequency of the vendor's billing cycle. Cardholders can choose the expiry date of recurring virtual cards, up to a few years out. 

Take for example: your team is trying a new SaaS tool and only wants to subscribe for one quarter. You can create a virtual subscription card to pay for that specific software account, valid for up to three months of use.

Key benefits of virtual debit cards 

Safer online transactions

Online shopping is significantly safer when every transaction uses unique card information. The traditional company card uses a static credit card number, increasing your security risk with every online purchase made with that card.

With single-use virtual cards, a new debit card number is generated for every purchase and immediately deactivated after use, making it impossible for hackers to steal and reuse card details. 

Virtual cards also deter internal abuse as every payment is tracked and tied to the unique cardholder. Finance teams can easily identify who made each purchase, what it was for, and which manager approved it. 

Stress-free card replacements

If a shared company card is stolen, the entire business can be impacted before you call the bank to freeze the card account. Virtual cards don't have this problem.

In the unlikely scenario that virtual card details are compromised, resolving the issue is simple and hassle-free. You can easily pause or cancel existing virtual cards and create new ones in a few clicks, without affecting any of your other payments or subscriptions. 

It's just as easy to manage payment methods when it comes to onboarding and offboarding employees: teams can generate or deactivate employee cards instantly from the central dashboard.

Benefits for finance teams

Greater control over company spending 

Companies using traditional corporate credit cards lack spend visibility. Finance teams shouldn't rely on month-end credit card statements for a summary of all transactions.

Spend management platforms and virtual cards give businesses access to real-time spend data and analysis. Teams can view current account information, account balances, and company-wide spend activity at any time, from one easy-to-use dashboard.

With greater spend visibility, finance can better assess company performance, and improve cost structure and spend policies to support long-term business growth. 

Instant expense reconciliation  

Paper receipt collection is a nightmare for finance teams. Closing the books often throws employees into a panicked search for the past month's expense receipts. 

Virtual cards and automated expense reconciliation provide a powerful solution for easy receipt capture. Using a connected mobile app, employees snap a photo to upload and submit their receipt at the moment of the purchase. Payment reconciled, instantly.

Smarter budget management

It's impossible to manage budgets proactively when teams wait until financial close to review spend activity. Smart budgeting requires real-time visibility over company finances.

Virtual debit cards enable companies to monitor company-wide expenses as they come in, while controlling how much can be spent. Prepaid cards always have a fixed balance, so there is no risk of going over budget. When employees need more money for expenses, managers can easily top up virtual cards with a click.

Benefits for employees

Every employee can have access

Traditional company cards make accessing company funds a restrictive and complex process. Employees have to manually ask for approval and then chase down a plastic card every time they need to make a purchase. This causes major inefficiencies and confusing expense policies.

Virtual prepaid cards and spend software solve this problem by enabling businesses to create and manage individual debit cards instantly from one centralized platform. When an employee needs to make a purchase, managers can review and approve their requests with a preset budget on their assigned card.

Easy control from a mobile app

Business travel is a necessity for many companies. Rather than paying out of pocket and waiting for reimbursements, employees can streamline their travel expenses with individual prepaid cards and a mobile app. With Mastercard or Visa virtual cards, teams have access to flexible spending anywhere in the world.

Employees with virtual debit cards can use their connected mobile app to:

  • Freeze, cancel, or create new cards

  • Request additional funds if their spend limit is reached

  • Track personal spending and view the team budget

  • Submit expense receipts instantly with mobile receipt capture

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Last update: August 24, 2021