Why ecommerce startups should use virtual credit cards
Most of what we do is on the Internet these days. That includes a lot of the purchases we make every day — either as individuals or as businesses.
But all of your online purchasing requirements will start to get much more complicated as you continue to grow your business. This is especially true if you’re working with a lot of different services or vendors and have many more employees that need to operate autonomously. All of this exposes you to more risk in the process.
So rather than issue new plastic (or metal) cards for every new employee, there is a new tool today called a virtual card. They’re great for what they do — and not just reducing the amount of plastic you use every day.
What is a virtual credit card?
Virtual cards are exactly what they sound like: cards without the plastic. The obvious benefit is that they prevent you from losing a piece of plastic — or having one stolen from your wallet. You can use virtual cards exclusively for online purchases.
Virtual cards are usually charge cards that management issues its employees. These are all paid off at the end of a specific period, which is typically at the end of the month. Charge cards have the benefit of not carrying interest on a rolling balance.
Some products (like Brex!) offer businesses a way to spin up quickly and shut down virtual cards. This lets companies quickly create new credit card numbers that they can use for one-off or ongoing purchases with much more control.
Why should I use a virtual credit card in the first place?
The Internet doesn’t care what kind of card you have!
In reality, any company (or any individual, really) encounters a severe amount of risk whenever they start entering credit card numbers into a web browser. There are tons of ways that a bad actor can steal that information and start using it for malicious purposes, like using your credit lines to buy an unnecessarily overwhelming amount of coffee.
As your operations start to get bigger and you bring more and more people in, a virtual card management system can make your life easier. You probably don’t want your employees tasked with any online operations dipping into the same card and then potentially causing a conflict when they start to get close to a credit limit.
One other virtual card benefit is you usually can copy the card numbers over in a web browser quickly instead of manually entering them, which reduces the risk of making mistakes.
Why does my ecommerce startup need a virtual corporate credit card?
As an ecommerce startup, you’re still probably operating with lots of different services and subscriptions. You’re probably a Google customer, and you probably pay for a storefront like Shopify or a website. You might have some specific relationships with vendors where you use a credit card for payments. Really, you have the same needs of any other small business — you just deliver a different product.
This is also important for ecommerce as you might have to front-load your spending on advertising and other tools before you can recognize your sales. Even small windows of fraud or theft could take reduce capital you need to invest ahead of your most significant sales periods.
While each vendor may have a unique kind of requirements or payment plans, virtual cards offer you a sort of swiss-army knife when approaching any online spending.
So, a quick recap:
Other things to watch for when it comes to virtual ecommerce corporate cards
Just because you’re using a virtual card with a pre-set limit doesn’t mean you’re automatically safe from any theft or fraud. There is still plenty of room for bad actors to take advantage of the limited time you have in running a business to slip in purchases that you might not notice. That’s why it helps to create virtual cards that have a set limit for an explicit ongoing purchase.
At Brex, our virtual ecommerce card product is a little different as we deploy what we call net-60 day terms for our ecommerce customers. That means that each purchase made on one specific day doesn’t have to be repaid until 60 days later. This allows us to effectively give ecommerce companies the benefit of any corporate card with additional capital ahead of their sales periods. They can deploy that on ad spend, operations, or anything else.
Still, you don’t want to get too trigger happy when it comes to virtual cards. Every single online purchase or subscription probably doesn’t need its own silo, or you’ll end up with a dashboard with dozens (or hundreds) of cards that gets unwieldy.