Activation sticker shock: New card may arrive already 'live'

Issuer policies vary on letting transactions go through on unactivated cards


To activate or not to activate? Issuer policies differ
DescTo activate or not to activate? Issuer policies differ ription

If you open a credit account, odds are your new card will arrive in the mail with a sticker attached and instructions to activate the card.

However, depending on the issuing bank and why you’re being sent new plastic, some new cards may arrive "live." Some work prior to activation, some work but only for limited transactions and others might not need to be activated at all.

Why the mix of procedures? For card issuers, it’s about balancing convenience and security, according to Doug Johnson, vice president and senior advisor for risk management policy for the American Bankers Association. If a card is sent already activated, “The bank is making the determination that convenience for the consumer outweighs the potential risk that may occur,” he added.

Here’s what you should know about today’s mix of credit card activation processes:

Card activation calms fraud concerns
For many card issuing banks, requiring cardholders to activate new cards is common and the process helps keep accounts secure.

To get a general sense of how issuers implement card activation procedures, contacted eight card issuing banks: U.S. Bank, Bank of America, Capital One, American Express, Wells Fargo, Chase, Pentagon Federal Credit Union and Navy Federal Credit Union. Representatives from all eight institutions confirmed that card activation procedures are used at least some of the time and all cited security as a reason for requesting that cardholders verify their new cards.

“We believe activating new accounts provides an additional layer of security, and we don’t think it provides a big barrier to their accounts,” said Randy Hopper, vice president of credit cards for Navy Federal Credit Union. “We’ve tried to give customers easy ways to activate their new cards.” Cardholders typically have a few options for activating their card: Call an automated activation line, log into an online account or use a mobile banking app.

It’s all about taking the necessary security measures so thieves don’t go digging through mailboxes and fish out cards they can use, said Pentagon Federal spokesman Thomas Johnson.

However, new card theft isn’t a major security issue these days, or at least it’s less of an issue than it was when reviewed the matter in 2009, according to Scott Stevenson, founder and CEO of Eliminate ID Theft, a credit protection service.

“Within our client base of those who are seeking identity theft insurance protection, of the folks that do claim identity theft has occurred, I don’t see a single one that was because of a card used that was not activated,” he said. “I don’t think it’s as big of a problem from an identity theft standpoint as it used to be.”

Digital identity fraud threats are much more common, thanks to data breaches and the masses of information on the Internet.

“It is so easy to get information on people today,” Stevenson added. “It is so easy to defraud folks that finding a mailbox with a card in it has such a low, low return compared to being able to go purchase lists of people’s names and card numbers off the black market. It’s just not worth it.”

Plus, “The vast majority of cards sent reach their intended destinations,” said ABA’s Johnson.

If someone does get hold of your new, active card before you do, don’t fret about fraud.

“I think the biggest thing cardholders should know is if they are sent a pre-activated card and someone else uses it, the cardholder will not be responsible for that transaction,” Johnson explained. “All they have to do is indicate to the bank that that transaction was unauthorized.”

The zero-liability fraud protections provided by the major card networks prevent victimized cardholders from shouldering the cost of fraud if their cards or account information is stolen.

Unactivated cards may still work
If a new card arrives at your door unactivated, that doesn’t necessarily mean it won’t work. Unactivated cards can sometimes be used to make purchases. This is still the case today and cardholder experiences may vary between issuing banks.

“There may be instances where a customer can use a card for small purchases before activation,” Johnson said. “Or the bank will let a customer make X amount of purchases before activation is required. That’s just the bank trying to make the transition process to a new card account easier.”

For example, while all new Bank of America cards need to be activated, according to spokeswoman Betty Riess, unactivated cards may work for some small value transactions. All cards will ultimately need to be activated, whether online, via mobile app or by calling the phone number listed on your new card materials. “It’s about balancing security with convenience,” Riess explained.

The same goes for American Express cards, which are all sent out with an activation request to help verify that cardholders have received their plastic and to reduce fraud risks. “Because of our relationship with our card members, we are able to selectively approve charges that we evaluate to be low risk, even if the card has not yet been activated,” said Ashley Tufts, spokeswoman for American Express.

I think the biggest thing cardholders should know is if they are sent a pre-activated card and someone else uses it, the cardholder will not be responsible for that transaction.

-- Doug Johnson
American Bankers Association

“For example, a card member receives their new card, puts it into their wallet and proceeds to use it for low dollar charge at a merchant they frequent, such as the coffee shop they visit every weekday morning in their neighborhood. Because we understand what typical behavior is for our card members, we would approve that charge and be relatively certain that the card was used by the card member,” said Tufts.

Now, if you try to use a brand new credit card prior to activation and it doesn’t work, don’t be surprised. Some banks, such as Navy Federal Credit Union, have set up new card accounts so no transactions will be approved until the card is activated.

“If it’s a new card, then no, it won’t work,” Hopper explained. “In the system there is essentially an activation flag that won’t allow any activity until the flag is removed through the activation process.”

Unactivated Wells Fargo and Pentagon Federal Credit Union cards won’t work if unactivated, either. Capital One was a little less specific, noting that “in general,” its credit cards cannot be used without activation, a representative said.

Because practices vary among banks, if you receive a card with a sticker or note advising activation, activate the card before attempting to use it so you don’t get caught off guard.

Some cards may arrive active
While most cards arriving in your mailbox will need manual activation at some point, there are some instances in which credit cards may be delivered pre-activated.

Three of the card-issuing banks contacted – U.S. Bank, Navy Federal Credit Union and Pentagon Federal Credit Union – noted specific instances in which cardholders may be sent active cards.

“The only cards we send out NOT requiring activation are replacement cards (damaged, same account number, etc.),” said U.S. Bank spokeswoman Maureen Mook. “All other cards including new, reissue and lost/stolen cards require activation.”

Navy Federal Credit Union follows a similar card activation procedure. “The only case where it would be active is if their plastic is damaged and they just request a replacement card and we just send them a new one with the same number,” Hopper said.

It makes sense that standard reissue cards would be sent already activated, according to ABA’s Johnson, so as not to disrupt any ongoing account activity while the card is in the mail. If the card number isn’t changing and there hasn’t been fraud associated with the card before, sending an active card through the mail may just be easier.

However, all cards – new or otherwise -- issued by Wells Fargo and Bank of America will need to be activated upon arrival, according to both banks. The same goes for cards issued by Pentagon Federal Credit Union, unless a cardholder specifically requests to have their card sent activated, according to spokesman Thomas Johnson.

Capital One and Chase did not specify if cards are ever sent out preactivated, but Chase customers are all asked to contact the bank either online or by phone so Chase can, “make sure the customer's card is ready for their next purchase,” according to Chase spokesman Rob Tacey.

To find out whether your new card will arrive pre-activated or not, contact the card issuing bank.

See related: Anatomy of a credit card

Published: March 11, 2016

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Updated: 10-20-2016

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