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Virtual Credit Cards Tout Safety, Yet Consumers Take a Pass

Convenience of regular cards trumps enhanced security for many shoppers

To deal with the potential hassles in the event of a return or refund request, Woolsey recommends keeping all electronic receipts, confirmation numbers or other documentation about purchases made via a virtual account number.

He and others say that Americans also aren't motivated to use disposable credit cards because consumers know they won't be held responsible for fraudulent charges.

Thanks to the Truth in Lending Act, liability for any unauthorized purchases made before you report a lost or stolen credit card generally is limited to $50. What's more, most major banks offer "zero liability" protection for fraudulent charges reported within 60 days. So in the event your card is compromised, you generally won't be on the hook for any amount as long as you promptly report the charges.

Another limitation of single-use cards: You can't use virtual card numbers inside retail stores or at any merchant where you need to show a physical card as proof, such as a hotel, car rental agency or movie theater.

"Virtual account numbers can add a degree of security to online transactions, but by and large they have been a solution in search of a problem," Woolsey says.

Consumers must remain vigilant

Even a more widely accepted alternative payment system such as PayPal, which lets anyone with an email address sign up to send and receive payments from other individuals, isn't without its own pros and cons, experts say. Nor is it immune to security breaches.

Users link their bank accounts or credit cards to PayPal, and access PayPal by entering their email address and a password. Such email password security has its own limitations, since some people are lax about establishing strong passwords.

According to the 2014 Identity Fraud Study from Javelin Strategy & Research, there were 13.1 million U.S. victims of identity theft in 2013 — a new victim every two seconds.

"Additionally, fraudsters increasingly turned to eBay, PayPal and Amazon with the stolen information to make purchases," Javelin researchers said.

All told, identity thieves stole $18 billion last year, including credit card fraud, compromised lines of credit and email payment accounts.

Such high levels of fraud show the need for vigilance. To learn more, visit AARP's Fraud Watch Network.

"In the end," Woolsey says, "no matter how much security banks layer into credit cards, consumers still have to monitor their credit card statements and be watchful."

Lynnette Khalfani-Cox, The Money Coach(R), is a personal finance expert, television and radio personality, and regular contributor to AARP. You can follow her on Twitter and on Facebook.


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