Go Virtual for Safer Online Shopping

Even if you're diligent in protecting your PC from every online hazard imaginable, you may not be able to do much about the biggest threat to your data--and to your finances. Thieves can tap into millions of financial records belonging to companies that charge or process credit cards.

The good news is that you can make your recorded credit card number worthless to any thief. Virtual credit card numbers--which you can get from some banks, PayPal, and a new online service--allow for additional fraud protections.

Banks typically offer fraud liability protection to guard against stolen or misused card numbers, but the hassle of proving your innocence and dealing with the aftermath might be just as painful as losing your money. Virtual credit card numbers keep you from having to deal with either scenario. Merchants process virtual numbers just as they would a standard card number, and you can use the numbers for online or phone purchases that don't require showing your card. However, if you're buying will-call tickets or anything else that requires you to present the card used to make the purchase, you shouldn't use a virtual number.

Virtual credit card numbers may be your best defense against credit card theft these days. A regular credit card number has real value on the Internet's black market, and data breaches in which criminals steal such numbers are on the rise. In August, the U.S. Department of Justice charged a Florida man with taking part in a huge heist of financial data from credit card processor Heartland Payment Systems. By the time authorities caught that suspect, the damage may have already been done: The stolen numbers almost certainly changed hands and appeared on underground sites that offer card numbers for a mere $2 each.

A crook who steals a virtual credit card number, however, gets only a meaningless string of numbers. If you have a credit card (not a debit card) from Bank of America, Citibank, or Discover, or if you use PayPal, you already have free access to the feature. A new online service called Shop Shield also provides various levels of protection.

All of those offerings add an extra step to any purchase, since you must first create a new card number through a banking site, desktop software, or a browser plug-in. That extra step is worth it, though, as every virtual number is tied to the first merchant that uses it, so any subsequent charges to the same virtual number are denied. Other options may allow you to set a spending limit or an expiration date.

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