What are Digital Credit Cards and How Do They Work?

October 18, 2021 Mutual Fund

The internet has changed the way we do the things, including shopping. Now a days, most individuals prefer online shopping over the traditional brick and mortar shopping, primarily due to the various discounts and convenience it offers. We can purchase any thing we require just by sitting at comfort of our homes, and also save our money, time and effort. Online transactions are secured as the banks and other payments gateways take necessary precautions at their end to secure your online transactions. However, when you use your credit card or internet banking details to perform online transactions, your sensitive information gets exposed to several risks and online frauds. As a measure to control such risk, many banks and Non-Banking Financial Companies (NBFCs) have launched Digital Credit cards to secure your sensitive banking information. This article will elucidate what digital cards are and how do they work.

What is a Digital Credit card?

Digital Credit Cards, also known as Virtual Credit Cards, are just like your normal credit cards, but available only in a virtual form. These cards are simply an extended version of your plastic cards and are designed to perform only when you do online transactions. So, your credit card issuer may offer you to transfer some limit of your existing credit card to a digital credit card or can also provide you with an additional limit above your existing credit card limit. You will receive all the necessary details, such as credit card number, expiry date, CVV, etc. of your digital credit card, which you can easily access online.

You can request for a virtual credit card online, set a credit card limit online, use it for online transactions, and pay off the bills online. A Virtual Credit Card is an instant, convenient, and secure way to access your credit card. However, unlike traditional credit cards, digital credit cards are generally valid for a very short duration of 24 to 48 hours. Some virtual credit cards are issued for a single transaction and will no longer be useful as soon as the card holder completes his/ her transaction.

What are the features and benefits of Digital Credit Cards?

To get a better idea of the product, I have listed below some features and benefits of digital credit cards over traditional physical credit cards:

• For enhanced security, the digital credit card is offered only to the primary cardholder and not to the secondary or add-on members.

• All the transactions are secured with One-Time-Password (OTP) that you are required to provide when using the card. You will immediately receive the OTP on your registered mobile number and email address while performing your transaction.

• Since the card is available to use only for online transactions and for a limited period, there are fewer chances of loss due to card theft.

• Generally, the digital credit card is offered for a short duration compared to traditional credit cards. You can also opt for a single-transaction digital credit card which will be valid only for one transaction and gets automatically blocked immediately after that. This feature ensures high security as you will not have to face any loss even if the card details are stolen by the cyber-criminals.

• As the digital credit card is available in a virtual form, once it is approved, you can have instant access to the card. You can instantly start making online payments by validating the transactions with OTPs, without having to wait for a physical card to arrive.

• A virtual credit card comes with a default transaction limit, which you can anytime customise online, as per your requirements.

• It is a convenient and hassle-free way to do domestic or international online transactions instantly.

• If you feel any security threat, you can block the card online. The card immediately gets blocked to avoid any misuse of the stolen information.

• Unlike plastic/physical cards, most digital credit cards come with zero joining and annual fees.

• There are no fees or interest levied on your transactions if you pay the bill before the due date.

• Once your digital credit card is expired, your balance limit will get transferred to your physical credit card.

• All the leading banks and NBFCs, such as HDFC Bank, Axis Bank, SBI, ICICI Bank, Bajaj Finance, etc. now offer virtual credit cards as an extension to their physical credit cards.

How does the Digital Credit Card work?

• You can generate a digital credit card as an extension to your physical credit card for online transactions.

• Once your online request is approved, the system will generate a sixteen-digit virtual credit card number for you.

• You will receive the details, such as your digital credit card number, expiry date, CVV, etc., which you can access online.

• While doing an online transaction, you need to enter the digital credit card number and its details, instead of your physical credit card details.

• Once you have validated the transaction with an OTP, your transaction will get complete.

Should you opt for a Digital Credit Card?

• A digital credit card is an extension of a physical credit card. Therefore, ensure that you have a primary credit card (physical credit card) before applying for a digital credit card.

• It offers maximum security to online transactions. So, if you need to do an online transaction that you think might not be secured, you should definitely avoid using your primary credit card details. Instead, the digital credit card can help you in such a situation as the virtual card is valid only for a limited period.

• Since most banks and NBFCs offer these virtual cards for free, you can use the card for a specific transaction and block it once the transaction is done. Or, you can also opt for a single-use virtual credit card.

• The virtual credit card can only be used for online transactions. So, if you prefer to buy goods and services offline, i.e. from brick and mortar shops, these cards might not be useful for you.

• Since the usage of digital credit cards is limited only to online transactions, you cannot withdraw cash from them.

To Conclude:

Digital credit card can be used to secure your online transactions and avoid any fraud, as it is the most convenient and secure way to make online transactions. However, ensure to make timely online payments of your virtual credit card dues, as failing to do so will attract heavy interest charges and can also damage your credit score. It is also advisable to check the features and charges with your credit card provider as they can differ from card to card.

This article first appeared on PersonalFN here