You’ve finished dinner at your favorite restaurant when the server returns with a frown on his face. Your credit card has been declined.
You’re about to freak out: Did someone steal my account info and charge over the credit limit? Then you look down at the card and realize, with a mixture of relief and annoyance: Oh, this card expired yesterday.
Why is this happening?
The short answer: Fraud prevention. The major networks (Visa and MasterCard) mandate that issuers (your bank or credit union, for example) put expiration dates on credit and debit cards. They’re meant to serve as one more data point that needs to get verified before a charge goes through.
“It just makes it harder for someone to initiate a transaction using stolen card credentials,” says Jason Oxman, CEO of the Electronics Transactions Association, a trade group representing the electronic payments industry. “You may have the card number, but you don’t have the expiration date.”
In that instance, the fraudulent purchase would be denied.
Fair enough, but is that the only reason?
Nope! Issuers are happy to comply because those expiration dates also serve marketing purposes.
“It gives them an opportunity to update the card (with a new logo or design) and get the consumer to use a new card technology,” Oxman says. One example: Many issuers are using expiration dates as a chance to replace outdated magnetic stripe cards with more secure Europay, MasterCard and Visa, or EMV, chip versions.
OK, but are these dates really necessary?
For now, yes, given that card fraud remains a big problem. But expiration dates may ultimately fade away.
Emerging fraud prevention measures, like tokenization or biometrics, may negate the need for an outdated data point. And issuers won’t have to worry about wear and tear or rebranding if more people start tapping their phones to pay.
In the meantime, here’s what to do to avoid potential inconveniences:
- Jot down on a calendar when your card is set to expire, says Thomas Nitzsche, a certified credit counselor with ClearPoint Credit Counseling Solutions. Keep an eye on your mail ahead of this date to make sure you receive (and activate) its replacement.
- Call your issuer if you don’t receive a new card in a timely fashion.
- Go through a few monthly billing statements to see what recurring charges, such as a utility bill or insurance payment, are tied to that card because those charges won’t go through once the card expires.
- Contact any applicable merchant or service provider to update the card information on file so payments get applied to the account without interruption, Nitzsche says. Common recurring charges include loan payments, gym memberships, magazine subscriptions, cable or cellphone bills.
- Sign up for email or text alerts that a bank, issuer or merchant provides. This will help you spot recurring charges you didn’t catch during your statement audit. Potentially helpful notifications include a payment received or missed payment alert.
What happens if I drop the ball?
Well, you could experience a disruption in service and incur a few late payment fees. In a worst-case scenario, a missed payment could get reported to the credit bureaus and hurt your credit score. If this happens, don’t despair. Call and explain the situation.
“Ask for late charges to be waived and for it to be removed from your credit report,” Nitzsche says. “If you have a good credit history, most creditors will reverse that.”
Then, monitor your report to make sure the negative information has been removed. You can pull yours for free at myBankrate.