If you’re planning on buying a virtual credit card or using a virtual credit card issuing system, then make sure you read this article, or you could be losing money! Below is my summary of almost the most complete virtual credit card usage rules for most virtual credit card issuing platforms and banks in the market for both personal and business users. By following this usage specification, you can use your virtual credit card completely smoothly and safely.
About Refusal to Pay
A normal consumer who uses a virtual credit card to make purchases on the site usually makes sure that there is a sufficient balance in the card. If you spend $15 on Amazon, but you only have $10 or even no balance on your card, it’s not normal for you to make a purchase at this time. The shopping site will assume that someone is stealing the credit card, and a normal person would not be unaware of how much balance they have on their card. There are also websites that are postpaid, such as Facebook or cloud server providers that bill by the traffic, and usually don’t deduct the money from your credit card until after the bill comes out. If you spend all the money on the card at this point, or if you don’t charge it to the card, the merchant will try to deduct the money repeatedly at this time, and then your credit card issuer finds out about the problem and will assume that you are using the card for fraud and may place a freeze on your card. Eventually the virtual credit card won’t work, and there’s even money to lose!
Declined is a rejection of our credit card or order, ostensibly initiated by a shopping site, but the credit card issuer will blame the card user for the problem. There are many possibilities for orders to be declined, usually due to the risk controls of the shopping site, and shopping sites with strict risk controls have high credit card requirements. For example, you are using a card that is issued in a country that the merchant does not allow, or you are using a card type that the merchant does not allow. Breaking the merchant’s rules, or the merchant’s subjective belief that your credit card is problematic, can be declined at any time, even if the payment is successful.
Different shopping sites have different risk controls for credit cards, mostly for the country of issuance and card type. Some shopping sites don’t support prepaid cards, gift cards; some only support credit or debit cards; some only support cards issued in specific countries, or even specific billing addresses, and require physical card photography, etc. In short, before paying with a virtual credit card, it’s a good idea to find out what this shopping site requires in terms of payment cards.
The above scenario assumes that the merchant declined the payment if the balance was sufficient and the other situation is that the merchant declined the payment due to pre-authorization and verification. This is usually a normal action by a shopping site to verify the validity of the card, like PayPal or Facebook’s small amount verification. It will either deduct 1-2 USD after adding the credit card and display a verification code on the statement, or deduct a specific amount and ask for the exact number of the deduction, which will be refunded directly after the verification. It’s possible that this will also be shown as a declined status.
Different virtual credit card platforms display it differently, some will show it as two transactions, one for a successful purchase and one for a refund; others will show it as a CANCEL. Some virtual credit card platforms do not allow for transactions to be declined or canceled, but if the card appears only once on the same shopping site and the purchases are normal after that, then there is no problem and it will generally be treated as normal use. If a virtual credit card has this multiple times (higher than 5%) on the same shopping site, then it may get the attention of the card issuer. The most annoying thing about virtual credit card platforms is that the same card is used on different sites and not only is there no proper transaction history, but it also generates a lot of declined, canceled records!
Sign up for a free trial
The websites that you can sign up for a free trial are Netflix, Spotify, Google Cloud, Aliyun Cloud, Microsoft Azure, Amazon AWS, etc. They use free trials to attract users to sign up, and when users sign up for a trial account with a credit card, they get a free service for a certain period of time. In addition to real users needing to try their services for free, there are others who sign up for these trial accounts and then take them for sale to make a profit. Since the number of credit cards, one can apply for is limited or even impossible, but virtual credit cards are the perfect replacement for this shortcoming. Applying for a virtual prepaid card and a virtual gift card is much less difficult, so many people use prepaid and debit cards instead of credit cards to make a profit on certain platforms (in fact, it’s already fraudulent at this moment), which arguably takes full advantage of the merchant’s free trial rule. But when the trial period expires and the merchant starts deducting charges from the credit card, if the user doesn’t charge to those cards or uses a non-reloadable prepaid card, then a large number of Declined records are generated.
The issuer will think you’re committing fraud, and the merchant will proactively find the issuer’s information by card number and report this to them. Once there are many credit cards with the same BIN that are doing this malicious behavior, then the merchant will pursue the bank, the bank will pursue the virtual credit card platform, and the virtual credit card platform will pursue the user, so many virtual credit card platforms do not allow users to sign up for a trial.
So when a large number of small transactions, typically 5% or more, are found on a virtual credit card bill, it causes the virtual credit card platform to take control of the risk on that card.
Credit card fraud
Using a virtual credit card for fraud is a serious crime! It is a behavior that is explicitly prohibited by all virtual credit card platforms. If the fraudulent use of a virtual credit card occurs, the virtual credit card platform will freeze the user’s account and report the fraud to the police, without refunding the balance on the card. Many virtual credit card platforms explicitly prohibit the use of virtual credit cards at Airbnb, Uber, and Lyft. When this is discovered, it is considered credit card fraud.