Technology is a wonderful thing. However, it can also be a detriment. As we continue to develop new ways to make purchases, scammers find new ways to get ahold of your personal information and steal your money.
To mitigate this risk, financial institutions and other up-and-coming companies have adopted what is called a "virtual credit card" here in Canada. In this article, we're going to go over some of the best virtual credit cards here in Canada. But first, we should have a look at what a virtual credit card is.
What is a virtual credit card?
When most consumers think of making an online purchase, they think of heading to the merchant, providing their credit card number along with their expiration date and CVV (3-digit security code). To most, this seems like a fairly routine process. However, it does expose you to potential fraud.
That is because whether it be your Mastercard or Visa card, you are giving all the credit card information you need for someone to make fraudulent purchases with your card. They can take your expiry date and the 16 digits from your regular card and make purchases in your name elsewhere.
There is peace of mind that most credit cards and financial institutions will reverse the fraudulent payments on your card. However, it is a process that is a pain to go through, and preventing the fraudulent purchase in the first place is in the best interest of both the card issuer and the consumer.
We can do exactly this with a virtual credit card. All a virtual credit card does versus a regular credit card is adds an additional layer of security. You will no longer have to provide your physical credit card information. Instead, your credit card provider will supply you with a random 16-digit credit card number to use in online transactions. They are also typically near instant approval, meaning you can start using the card right away.
The added security comes from the fact that virtual credit cards are used once, and never again. If your card information is compromised using a virtual credit card while shopping online even if a scammer gets ahold of the card information, it is useless to them as the card information is no longer active.
The pros of a virtual credit card
As mentioned above, the main benefit of a virtual credit card is added security for both you and the issuer. But, there are also some other key benefits.
- The ability to add spending limits to the virtual card
- The ability to add an expiration date to the card in the event you never end up using it
- The ability to gain instant access to the card, instead of waiting for it in the mail like a physical card
The cons of a virtual credit card
There are two sides to every story. And, there is no doubt drawbacks to the virtual credit card. One of the main ones being the fact that the randomized number often expires, and you'll need to get a new one if you want to make another purchase. But, other drawbacks include:
- The inability (for the most part) to use it in a retail environment like a shopping mall
- Potential issues with reservations, as the randomized number is not the same as your physical credit card, which is often needed at check-in
- Subscriptions will lapse if a virtual credit card is used considering it is one time use
- Product returns that must go back to the original credit card may become an issue, as the virtual card does not exist anymore
- This is not a credit building device
How to apply for a virtual credit card in Canada
Getting access to a virtual credit card in Canada is a little more difficult than in the United States. For one, not many major banks offer it in Canada yet. So, you'll need to get a hold of your financial institution and see if they will be able to provide you with a virtual credit card.
However, there are plenty of virtual credit cards here in Canada that are simply prepaid credit cards. In fact, most of the ones on this list will be exactly that. They're much easier to apply for, are typically free, and because they are preloaded, some can also be used by those with poor credit.
Why not a digital wallet over a virtual credit card?
Many companies now offer digital wallets to protect users information and money even further. No, we're not talking about a crypto wallet. More along the lines of Apple Pay or Google Pay.
The interesting thing about Apple Pay, you can get the company's Apple Card (although not here in Canada yet), which is an extremely convenient way to get both a virtual and physical credit card that rewards you with cashback purchases, which are further amplified if you use it for Apple products.
Platforms like Google Pay and Apple Pay are designed much the same as a virtual credit card. The platform generates a unique credit card number for single use, and discards it afterward.
Now that we've discussed what a virtual credit card is, how virtual credit cards work, and some alternative options like a prepaid card or digital wallet, let's go over some of the top virtual credit cards that are available to Canadians today.
The top virtual credit cards in Canada
- Equitable Bank Card
- KOHO Prepaid Mastercard (Basic)
- KOHO Premium Mastercard Prepaid Card
- RBC Virtual Visa Debit Card
- Wealthsimple Cash Card
- STACK Prepaid Mastercard
- Wise Virtual Card
EQ Bank Card
New to 2023, the Equitable Bank card is a fantastic way for Canadians to not only earn 2.5% interest on their savings, but also 0.5% cash back on all your purchases made with the card, whether they're in-store or online.
In addition to this, you'll be able to withdraw from any ATM in Canada, and Equitable Bank will instantly refund the fee back to your card. So, if you're strapped for cash at the mall and need to withdraw, you won't feel bad about accepting the $4.95 fee to do so.
Because the EQ Bank Card is a pre-paid Mastercard, it can be utilized as a normal credit card and also comes with a 0% fee for foreign exchange.
You'll need an account attached to the EQ Bank Card. While this seems like a nuisance, it's important to understand that you'll make 2.5% interest with zero fees on that account you open.
I recently closed down all of my traditional bank accounts and moved to Equitable Bank. My EQ Bank Card now acts like my debit card, and instead of paying monthly fees, I'm getting money back every month via their interest on the accounts plus the cash back from utilizing the card. For me, it is a near $50 swing on a monthly basis.
Talk about savings! Although this card does fall short in terms of some others regarding cash back rewards, in my opinion it is the easiest to use.
KOHO Prepaid Mastercard (Basic)
Before we get into what the card is, a little introduction to KOHO. The company offers free spending and savings accounts designed for Canadians. If you utilize the company's mobile app and this prepaid Mastercard, it should help you keep tabs on your budget, and saving money.
There is a large difference between a traditional credit card and the KOHO Prepaid Mastercard, that being KOHO spends money you've funded the card with on purchases. There is no "credit" with the KOHO card.
This allows you to spend more mindfully and should allow you to save more money as you aren't going into debt with this card. Funding the card is as easy as setting up an e-transfer.
So you might be asking, why even use the KOHO card?
If you have to fund it with your own money, why would you use the KOHO card? It's simple. First, you get cash back. It's relatively little, 0.5%. However, it's better than what your traditional chequing account likely offers you. If you're a KOHO Premium member, you can even make 2% back on some particular purchases.
Fees with the KOHO Prepaid Mastercard
You can save on some fees by upgrading to KOHO Premium, but before we dig into that just know that the following fees are applicable if you have the basic plan:
- Inactivity fee of $1 if the account has been open for 13 months and inactive for 6. Inactive is defined by accounts that have not made any transactions or loaded money onto the account. It should be relatively easy to avoid this fee
- Foreign transactionfees of 1.5%
- If you're funding your KOHO card with a Visa, there is a 75-cent fee if it's under $300.01.
In terms of account fees, however, there is no charge on either a monthly or annual basis to hold it.
Is your money safe with KOHO?
In short, yes. There should be zero issues in terms of the safety of the money you deposit on KOHO. The funds are held at Peoples Trust, which is a federally regulated bank. So, if KOHO were to find themselves in a bit of hot water, you'd still have access to your capital.
And, if you place your money into accounts at KOHO that bear interest, they are eligible for CDIC insurance.
KOHO Premium Mastercard Prepaid card
If you're willing to pay a monthly fee to access some juicy features, the KOHO Premium Mastercard is worth a closer look. Before we get to costs, let's look at the types of features this card offers.
First off, the increased cash back amounts. Instead of 0.5% like the basic card above, you'll receive 2% back when you make a major purchase on eating and drinking, groceries, and transportation. So whether you're dining out on the town, shopping at a grocery store, or taking an Uber home, you're getting more cash back on the KOHO Premium card than the regular to the tune of $1.50 extra per $100 spent.
There are no foreign exchange fees with the KOHO Premium card, and you can even use one free international withdrawal from an ATM every single month.
The card even offers extras like price protection, to make sure you're getting the lowest possible prices on your goods.
In terms of costs, it's either $9 a month or $84 a year, and KOHO will let you take a 30-day trial run of it for free.
So should I go KOHO basic or KOHO Premium?
This question should be relatively easy to answer. The benefits of KOHO Premium are pretty cut and dry. So, it just becomes a situation where you need to weigh your monthly spending in terms of purchases and transaction fees and see if it pays for the monthly or annual membership.
For example, with 2% cash back on groceries, transportation, and dining out, you need to spend just $500 to get $10 in cash back, covering your monthly fee. Run some numbers and weigh the options to see if KOHO Premium is for you.
RBC Virtual Visa Debit Card
We are well aware that many readers here at Stocktrades love the security and stability of getting products from one of Canada's Big 5 Banks. And as of right now, Royal Bank is one of the only major institutions to offer a virtual credit card.
The good thing for Canadians? It has a ton of options and is well suited for many Canadian's needs. Full disclosure though, you do need an active RBC card to gain access to this virtual credit card.
In terms of fees, there are none. And along with this, any purchases or recurring payments made with your Virtual Visa Debit Number will not count against debit transaction limits on your chequing account.
Activation is instant through your RBC online banking platform, and the card details can be accessed right away in your mobile app. When you purchase with this virtual credit card, the funds will simply be taken out of whatever chequing account you have associated it with.
Considering your digits do not change, unless a single-use virtual card, it is a strong option for subscription payments as well.
Overall, this is an extremely handy card for RBC clients, and we have no doubt more big banks will add this type of card to their arsenal shortly.
Wealthsimple Cash card
Wealthsimple’s prepaid Visa “Cash Card” essentially works like a debit card. It carries no interest rates, there are no annual fees, and it won’t impact your credit score.
Cash Card users earn 1% cash back on all purchases. You can easily find other free, non-prepaid credit cards that will beat that rate. But it does beat out the top virtual credit card mentioned on this list, KOHO.
The Wealthsimple Cash card works with many other popular payment platforms like Apple Pay, Google Pay, and Samsung Pay, and it also includes an unlimited amount of free e-transfers.
A really handy feature on Wealthsimple Cash when used in combination with the Cash App is its ability to split different purchases, and send out requests for money to others who are using the card. For example, just enter two or more people’s $igns, type in the total bill amount, and it’ll send a request to each person for their share.
You're allowed a daily limit of $500 per ATM withdrawal with a max of $1000 per day. Along with this, you have a maximum spending limit of $10,000 per day.
STACK Prepaid Mastercard
The STACK Prepaid Mastercard is fairly unique in its features. It doesn't give you cash back on broad-based purchases in particular categories. Instead, it partners with retailers to offer added cash back bonuses if you choose to shop at those particular stores.
At the time of writing this article, there are 140 select merchants partnered up with STACK, including popular food delivery platforms like HelloFresh and Doordash, along with major retailers like Indigo and Adidas.
The card doesn't only offer straight-up cash back either. Get unique discounts like a buck off your gas, groceries, and coffee, or potentially even get 20% cashback on your next trip. I'd suggest prospective STACK card holders head to their rewards section to see what kind of deals they can get.
You can sign up and use the virtual card instantly, with no need to wait for a card in the mail. The card easily integrates into almost all virtual wallets and also has an outstanding app to help you manage your finances and spend better.
There are no fees on the card, but with one catch. In terms of FX fees, you'll need to spend over $350 per month on the card to have them waived. In terms of overall limitations, you are allowed $500 per ATM transaction, $2500 per bill payment, and can hold no more than $20,000 on the card.
Wise Virtual Card
Formerly known as TransferWise, Wise is one of the best places to exchange and send foreign currencies online. Their virtual credit card is top-notch, much like their FX platform.
The Wise Virtual card allows you to spend using the company's real exchange rate online, giving you access to better foreign currency rates, all while existing only on your phone or laptop.
You can hold over 50 currencies with the card and will be able to not only make payments online but also freeze your debit card after each purchase to avoid any chance of it being compromised. Much like the other cards on this list, you can use it with Apple Pay, Google Pay, Samsung Pay, and other popular digital wallets.
The best part? The card is free to those who have a personal or business Wise account if you are Canadian. The same cannot be said for its customers in Japan or the United States.
It's the perfect card for those looking for some added security while spending abroad, as the bread and butter of this Wise card is foreign currency. You will need to order a physical card, however, you will not need to wait for it to begin using the Wise Virtual Card.
Overall, there are a wide variety of virtual credit cards for Canadians to choose from today, and there will be many more in the future
Consumers are looking for a more convenient way to spend without sacrificing security. Virtual credit cards provide this, and many companies are jumping onto the bandwagon and offering their own. Royal Bank was the first major bank here to do so, but we expect many credit card issuers and other major financial institutions to follow relatively quickly.
With the rise of e-commerce shopping, holding an actual credit card could become a rarity in this day and age, as virtual credit card numbers are easier, can be fetched relatively quickly right from your smartphone or other mobile devices, and do not expose your actual credit card details, ultimately preventing or at least reducing the chance of fraudulent activity.
If there are any other cards you feel should be added to this list, feel free to shoot us an e-mail and we'll do a review.