Virtual cards have become popular over the last few years, thanks to their ease of use and tech savviness. A virtual card allows you to pay for items online or in-storeusing payment apps. The big difference is that you don’t have to take the card out from your wallet or provide your credit card details.
While virtual cards have many benefits, are they good for building your credit score? Keep reading this post for the answer.
How does a virtual card work?
Virtual cardscan be used like a debit or credit card, and depending on where you get your debit or credit card from, you can get a virtual card for the same product (i.e. you can get a virtual card for your credit card). Virtual cards are not physical cards and are often found in digital wallets or used with payment apps. Depending on where you get your virtual card from, they can also come with a mobile banking app or your virtual card details are sent to you via SMS.
Virtual cards, like FASTACard, are generally used for online payments and e-commerce, like shopping online. For physical merchants to accept virtual cards, they either accept digital wallets like Apple Pay and Google Pay, or through a payment app like SnapScan and Zapper.
Why your credit score matters
When you apply for credit from a credit lender, whether it’s a credit card or personal loan, the lender may check yourcredit scorefirst to determine the likelihood of you repaying your debt and how quickly you are able to repay your debt.
So your credit score is a reliable indicator that allows credit lenders to assess your ability to repay the debt on time. Maintaining a healthy credit profile and good credit score enables you to borrow money when you need it the most or for something important, such as an unexpected event, unforeseen expenses like car repairs, paying for municipal or medical bills, and more.
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How can virtual cards build my credit score?
Factors that affect your credit scoreinclude hard enquiries, your credit and payment history, and your credit usage. While using a virtual debit card won’t have an impact on your credit score,using a virtual credit card will. This is because of how you will use the credit on your virtual credit card, as well as your ability to repay the debt on time.
If you use your virtual credit card wisely, by paying (at least) the minimum monthly amount due on time, a virtual credit card can help youbuild your credit score. One of the most important factors of your credit score is your payment history, and making payments on time and consistently can help boost your credit score. Read our post for tips onhow you can plan for your loan repayments.
But remember…
If you are looking to get a virtual credit card, you want to avoid making too many applications as this can have a negative impact on your credit score. Remember that if you make too many credit applications, these will be seen as hard enquires and too manycredit enquirieswith different credit providers can hurt your credit score. The same applies if you make multiple credit applications for a single product (like applying for a FASTACard multiple times).
Want to build your credit score using a virtual credit card? Read our post on howFASTACard can improve your credit score.
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