July 20, 2009
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News: Virtual Credit Cards Deters Fraud
Because of the difficulty in getting companies to cancel recurring credit card charges, consumers have become more cautious in accepting free trials on the internet. What typically occurs is that the company offers a free 15 to 30 free trail. They ask you for your credit card information to pay for shipping and handling. Meanwhile, by the time you get shipped the product, it is already near the end of the free trial and the company begins automatic shipment and recurring credit card billing. Better Business Bureaus across the county have reported they have received large numbers of complaints where consumers are unable to get these companies to stop charging their cards. Furthermore, it is virtually impossible to get any charges reversed. In some cases, consumers have had to resort to closing down accounts just to rectify the problem.
There is an alternative that most consumers aren't aware of. It's called a "virtual credit card." A virtual card has been around for about five years and is offered by most major lenders including Citi, Discover, Bank of America, and PayPal. The virtual card was initially designed as an alternative method of payment for internet purchases to protect consumers who are concerned about getting scammed. It allows consumers to generate a one-time card number or a maximum limit which prevents companies from adding additional charges or recurring charges. What's more, the virtual card is recognized as a regular credit card.
Each company has their own unique system, but they generally function in the same way. Customers sign up for the service, download a simple program on their computer, and get ready to shop. When the customer is ready to make a purchase, the system generates a one-time use 16 digit credit card number. Depending on the limits set by the consumer, the number is either used again at the same online store or is thrown away. Some consumers say taking the extra time to set up the restrictions of the virtual card doesn't compensate for the advantages. Those who have been scammed, say there is no substitution for the peace of mind in knowing they are protected against the predatory actions of unscrupulous companies.