One-Time Use Credit Cards

Written by Mark Sanborn: May 22, 2008

A new era of credit card protection is here! Paypal is offering disposable one-time use credit cards free of charge. You don’t even need to even own a credit card to use them. A simple Paypal membership will suffice.

Today I was logging into my Paypal account using my Verisign security key. The security key makes logging into Paypal so fun that I do it more than I need to. Yes I know its nerdy and the novelty will probably wear off soon but while in the middle of my nerdy habits I rediscovered the Paypal secure cards.

I have known about Paypal’s ability to generate one-time passwords for about a month now. Last time I checked the service I was under the impression that you needed to have a Paypal credit card in order to generate these one time use credit cards. On top of that Paypal made it seem as if you needed to download their Windows only plugin to take advantage of the service. That was until I logged in recently and noticed they had changed the site layout a bit and the secure cards option is built into the web interface.

There is no need to have a Paypal credit card or use the Windows only plugin. This is great news because I don’t need yet another credit card and as a Linux user I am annoyed by crappy plugin software that is Windows only.

Why this is awesome?

It is awesome because it adds another layer of protection against identity theft and un-authorized credit card charges. I did a quick search and no other company is offering a similar service. With the combination of using my security key for multi-factor authentication and the one-time use credit cards this is as secure as it gets right now.

Let me tell you a quick story. About two years ago I signed up to a free credit report. My roommate had said how great of a service it was and how you get two of them for free each year. I thought well, what is there to lose? Well I can tell you it cost my about $60 by the time it was over. You see when I signed up they requested a credit card to verify that I was who I said I was. Normally I would have been a bit skeptical at this point but since the credit reporting companies are owned and operated in joint with the credit card companies I figured it was a legit way of verifying my identity.

Well a few months later I received a strange bill on my credit card statement. The line item on the statement didn’t have the company’s name or anything indicating that it was the credit reporting company. After further investigation I found out that they had been charging me $12.95/month.

I am sure the charges were written in fine print but who reads the fine print? If I had used Paypal’s one time use credit card I would never have had this problem. I would have made a credit card with a maximum charge of $1 and used that “card” to sign up for their shady service. As soon was I was signed up I could then disable the card.

How it works

To use it, login to Paypal and go to Paypal Plugin then Secure Cards. From there you click Generate New. You will then have the option to make a single use card or a multi-use. The single use credit card can only be charged one time. All other charges after the initial charge will be declined.

The multi-use cards will accept the first company that charges it. Every charge after the first must match the company name or the charge will be declined. This is great for setting up a credit card for repeat charge subscriptions.

In the beta version they allowed you to specify the credit card’s max value. Unfortunately, it doesn’t look like they are supporting this feature anymore. I really hope they bring it back.

No more traditional credit cards

For online purchases this is it. I am done using traditional credit cards for online use. If you think about it why would you ever give your number to anyone online? They don’t need the physical card or your signature to make the charge. The CVV2 and address verification is not always done by all companies. In my opinion Paypal’s method is far superior. Of course, shady companies like the free credit report wont like it too much when the “card” is canceled moments after signup. I have no sympathy for a business with a revenue model that preys on people that don’t read the fine print.

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