Back to learn

What is a virtual card?

5 min read

virtual card

Written By

Sam Boyer
Sam Boyer

Rounding it up

  • Virtual cards are stored in your phone of on your computer and are linked to your actual card

  • When making a purchase, virtual cards generate new temporary card numbers so your real numbers are never exposed to potential data breaches

  • Virtual cards can be created and managed for different merchants, for set timeframes, with spending limits, and can be locked and unlocked as needed

There really isn’t much your cell phone can’t do these days. Smartphones keep getting smarter and smarter – replacing the need to carry separate items like cameras, music players, maps, planners, games.

And you can add credit cards to that list. Virtual cards replace the need to carry your physical wallet – in certain cases, anyway. Virtual cards are digital replicas of your physical card with an added level of security.

Want to know more? Read on to learn more about virtual cards.

What are virtual cards and how do they work?

Virtual cards are more or less what they sound like – cards that are hosted virtually on your phone. You may already be familiar with the digital wallet on your phone. Virtual cards are stored in your digital wallet, alongside other cards you may have saved like concert passes, loyalty cards, and other digital debit and credit cards.

Virtual cards are pretty easy to operate and they can be used for online purchases with merchants that accept credit card payments, and in-person anywhere that accepts tap payments in Canada (where your phone can be used instead of a physical card to tap for payments).

Virtual cards actually come in two forms – “digital cards” and “virtual cards”. We’ll describe both here for clarity, but this article focuses on those most commonly referred to as virtual cards.

Digital cards

In one form – which you might be most familiar with – you store a version of your regular card digitally into your phone’s wallet. This would be the most common example, loading your regular card into wallets like Apple Pay, Google Pay, or Samsung Pay. This is a “digital” version of your physical card saved into your phone’s wallet, with the same 16-digit number, expiry date, and security (CVC) numbers. When you make a purchase this way, a payment “token” is generated by the wallet (a unique code linked to your card that doesn’t share any real account details with vendors or third-parties) at the point of sale. Tokenization keeps your details safe. Digital cards with tokenization are usually linked to the digital wallet they’re attached to, whereas “virtual cards” can be used external to your digital wallet for online payments.

Virtual cards

The other form of virtual cards – sometimes called virtual card numbers, or virtual numbers – are linked to your card but have another completely different 16-digit card number generated for online purchases. This new set of virtual numbers substitute for your actual card numbers, allowing you to make a purchase without ever sharing your real numbers. They have unique card numbers, expiry date, and security (CVC) numbers. The key thing here is that your funds come out of your account like normal but, because the numbers are unique, your real numbers are never exposed to a potential fraud or a data breach.

Virtual cards have flexibility and added security. There are different versions out there too. Some banks offer the ability to have different virtual cards for different merchants, with the ability to set spending limits on each (all linked to your actual real card account). Some are even single-use or temporary virtual cards, for one-time payments or with short-term access – once used or expired, the numbers can’t be used again. You can generate and terminate virtual numbers, as needed.

Most banks will require you to download an app or a web browser add-on in order to generate and use virtual numbers. Different banks do this in different ways, but their tools will generate the virtual numbers for you when you require them. You can manage the virtual numbers using the same app or system.

Benefits and drawbacks of a virtual card

Benefits of a virtual card


In the simplest sense, virtual cards are convenient because they save you having to always carry around your purse or wallet. With your cards stored in your phone, you really just have to make sure you’ve got your phone on you – and let’s be real, of course you’ve got your phone on you.

Added security

Credit cards are mostly pretty safe, but data breaches, fraud, and thefts do happen. Virtual cards have an added layer of security because they never share your real card numbers. By masking your real card details with temporary numbers, it means even if your details were stolen in a data hack the thieves don’t have access to your real personal data or your real account. You can simply terminate the unique numbers on file with the merchant that suffered the breach and generate new numbers.

Spending controls

With virtual cards, you can set limits on spending, set restrictions on what vendors they can be used with, and set expiry dates. This gives you a lot of control over how and when your funds are spent. You can also lock and unlock virtual cards on your phone. This can assist with your own personal controls, and also help parents who want to allow online spending for their children, but want to limit how, where and on what they’re spending.

Drawbacks of a virtual card


You may run into problems trying to return products in person that you’ve bought with a virtual card. This is because merchants will often require you to present the same card you used to make the purchase – but unfortunately your physical card numbers won’t match the generated unique numbers used for the purchase. In these cases, you may need to accept store credit and it might require some explanation. A similar problem can occur with online purchases that you need to pick up in person, if the merchant needs you to swipe or verify the card numbers that made the purchase.


Similarly, when making bookings at hotels or car rentals, you will likely be required to verify the card used when you made the booking online. Since the virtual numbers won’t match your physical card, even though the virtual numbers are linked to the real account, you may have trouble with verification.

KOHO virtual prepaid Mastercard

If you’re interested in virtual cards, here’s some good news: KOHO actually provides virtual cards free to all account holders.

To be clear, KOHO’s reloadable prepaid Mastercards aren’t credit cards. But they function in much the same way and have a lot of the same benefits – but no interest and fewer fees. The main difference is that with a prepaid card you’re spending your own money which you’ve loaded onto your account, versus a credit card which spends money you borrow from a bank and have to repay.


In a lot of ways, virtual cards are incredibly useful. They’re handy – right there in your phone – with added security for keeping your account safe. If convenience and added safety are on your list of must-haves when it comes to online shopping, then virtual cards are well worth your consideration.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!

Sam Boyer

Sam Boyer spends, invests, budgets, and writes. He enjoys writing about things he wishes he’d learned earlier — like spending, investing, and budgeting. A journalist originally from New Zealand, Sam has written extensively about consumer affairs, insurance, travel, health, and crime.



AboutAffiliatesCareersCommunity DiscountsCultureEnterpriseLearnNewcomersTravelStatusStudent & Graduate Discounts


The KOHO Mastercard® Prepaid card is issued by KOHO Financial Inc. pursuant to license by Mastercard International Incorporated. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated.

By using this website, you accept our Terms and Conditions. Follow these links for more information on our Privacy Policy and Accessibility Policy. © 2024 KOHO Financial Inc.