Over recent years, virtual credit cards have been more and more common. They have become a useful alternative to prepaid cards and other credit cards for fair credit and our guide looks at what they are, who they’re ideal for and what the main alternatives are.

What are virtual credit cards?

Virtual credit cards are a type of payment card that works in much the same way as a traditional credit card. However, the main difference between a virtual and a traditional credit card is that no physical card actually exists. Virtual credit cards can either be printed on paper for the duration of their use or simply exist in an electronic format.

When you need to make a card payment online or by telephone, the card details (card number, security number and expiry date) are all generated electronically. Depending on the provider of your virtual credit card the card information is either generated on a piece of software downloaded to your PC or on the card provider’s website.

Who are virtual credit cards designed for?

There are two main types of people that virtual credit cards are designed for.

Firstly, they are perfect if you already hold credit cards but you don’t want to disclose your card details to retailers.

Secondly, they are an excellent alternative to guaranteed approval credit cards or credit cards for fair credit. If you are struggling to be agreed for a credit card – perhaps because you have a less than perfect credit history – then virtual credit cards can work as a ‘prepaid’ card, helping you if you can’t get a credit card elsewhere.

The pros and cons of virtual credit cards

If you want to pay for goods and services from a retailer who you do not 100 per cent trust, virtual credit cards can work well. They enable you to avoid providing your actual credit card details to the retailer and, if the service is offered by your credit card company, you don’t even need to open a new account.

Virtual credit cards are also a good alternative to guaranteed approval credit cards if you want to buy goods and services by telephone or online and you don’t have a credit or debit card.

Bear in mind that virtual credit cards are only for ‘card not present’ transactions and so you can’t use them in High Street stores. They are designed for online and telephone use. In addition, you may have to download software to generate your card details which means you can’t use them if you’re away from your PC. And, as you get a different card number each time, you will always have to fill out payment details when you buy something online.

What are the alternatives to virtual credit cards?

If you’re struggling to be accepted for a credit card then you could also consider guaranteed approval credit cards. These cards are available to everyone, irrespective of their credit history.

In addition, credit cards for fair or bad credit are also available, although you may pay a higher rate of interest on these cards than on traditional credit cards.

Prepaid cards are also increasing in popularity. You load money on to a prepaid card and then use it to pay for goods and services or to withdraw cash from an ATM. You can never go overdrawn and there is no interest to the card provider.

Online services such as PayPal and Google Checkout are also viable alternatives to paying for goods and services. These systems hide your card details from retailers, although you do have to link these services to a credit or debit card.