Why hotels should (not) want virtual credit cards

Virtual credit cards (VCC) are slowly taking over the world of payments. There's a big chance you already work with them in the hotel. Are you aware of the reason behind the popularity of the VCC, and do you know what you need to keep in mind when you receive such a card?  In this article, we tell you everything you need to know about virtual credit cards.


What is a virtual credit card (VCC)?

A virtual credit card is a randomly generated 16-digit number associated with the credit card of your guests. It functions like a regular credit card and helps guests make secure online payments by protecting their actual card details from falling into the wrong hands.

Many booking sites such as Booking.com, Expedia, and Agoda already use VCC's, to maintain the safety of the bookers' credit card details.


Why do guests and booking sites use a virtual credit card?

Virtual credit cards are meant to keep the booker's credit card details safe and help them make secure online payments. Instead of the booking site supplying the real credit card details to the hotel, they send coded credit card details. For example, Booking.com sends a new VCC for every transaction, no matter if it's the same booker. After the hotel has charged the virtual credit card, the details become invalid, making it an unattractive target for data attacks from hackers.

On an additional note: please know that Booking.com doesn’t only apply the VCC process to credit card confirmed bookings. Every payment, no matter which payment method the guest used, will be transferred to the hotel via a virtual credit card.

Also read: How to handle credit card information in your hotel safely


How do virtual credit cards work?

The process of paying with a virtual credit card doesn't differ a lot from normal credit card payments. In a nutshell, it goes like this: the guest books a room via Expedia, for example, and they fill in all needed information (including their real credit card details). Then Expedia charges the credit card of the guest.

Next step for Expedia is to create a virtual credit card, and send a reservation confirmation including the VCC to the hotel. The hotel then charges the virtual credit card and will never know the guests’ real credit card details.

Virtual credit card flow smarthotel

Although this process is quite straight forward, the way the hotelier processes the VCC payment can differ per hotel. However, there are a few things every hotelier should keep in mind:

  • A virtual credit card has higher Interchange++ fees than an actual credit card.
  • There are different charging times than you're used to.
  • The booking site can set its own conditions on the VCC, such as activation date and cancellation policies.
  • You don’t have the option to charge additional room charges, as only the booked rate can be charged.


When can you charge virtual credit cards?

Virtual credit cards have a limited charging period and the charging rules differ per booking site. For example, Booking.com activates their VCCs one day after the check-in date, and Expedia activates the VCC only on the check-out date.

In case the guest has additional expenses during the stay, you'll have to charge those to their real credit cards since the VCC only allows the booked rate to be charged. However, you must be careful not to overwrite the VCC details with the normal credit card details in the reservation system (PMS).

In other words, with virtual credit cards, you need to step aside from your normal payment process and adapt to the requirements of each booking site that offers VCCs. The administrational load might even increase due to it.


Automatically charge virtual credit cards

Did you know that virtual credit cards can be sent directly to your Payment Provider without having to manually charge them? Thanks to SmartCONNECT for Payment and its direct integration to your PMS (via the payment gateway), you can automatically and securely verify or charge (virtual) credit cards.

Curious? Find out more: https://www.smarthotel.nl/en/smartconnect-for-payment/


What is Interchange++?

Talking about the disadvantages of the virtual credit card, we must look at the Interchange++. It's a pricing type that is mostly used in Europe and North America. This pricing model offers more transparency thanks to a detailed breakdown of your credit card costs. The Interchange++ consists of three different fees, which are explained below.


  • Scheme fee (first +)

Visa and MasterCard charge fees for using their network. The fees do not fluctuate and are often between 0,1% and 0,65% (depending on the type of card, e.g. Platinum or Commercial).


  • Merchant service charge (second +)

Also called the acquirer fee; it is the fee that is charged for processing payments. The acquirer is often your payment solution, such as Adyen or WorldLine. For example, the fees for Adyen starts from 0,60% per transaction.


  • Interchange fee

The interchange fee is for the issuing bank (the customer's bank) and, for normal credit cards, is no more than 0,3% per transaction and 0,2% for debit cards. However, for virtual credit cards the fee much higher (1,65%). It's 5,5 times higher than the normal credit card interchange fee.


Why are the Interchange fees higher for virtual credit cards?

It’s quite simple: more actions need to be taken to process the payment. And don’t forget the new PSD2 regulation in Europe, which makes it harder to pass card details to third parties (in this case hotels).

Our PMS partner Mews made a nice and clean calculation overview of the Interchange++ costs. In case you're interested, have a look.



An advantage of virtual credit cards is that you no longer have to worry about storing payment data securely. Although this security is pleasant for both guest and hotelier, there is also a downside to the VCC. For example, you pay higher interchange++ fees, and the time frame in which you can collect the payment is different from a regular card.

Regardless, almost every hotelier knows that virtual credit cards are basically impossible to circumvent. So even if you are against this new payment method, you have to work with it.


NB: The information in this article is based on European numbers. The fees might differ if you're located on another continent, or you receive fewer European payments.


SmartCONNECT for Payment


About SmartHOTEL 

For more than 16 years, SmartHOTEL has been helping hoteliers navigate the exciting world of online distribution. From our office based in the Netherlands and the United Kingdom, our team serves independent hotels, hostels and chains worldwide by providing channel management and tailored online distribution solutions. A lot has changed over the last years, but our goal remains the same: simply connect hotels to the world. For any questions regarding our services, please contact us at sales@smarthotel.nl or call +31 (0)182 75 11 18. 


By Chantal Mieremet | February 09, 2021

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