Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com.
Dear To Her Credit, Why do credit cards have to expire every year? It seems like
a lot of trouble, always having to get new cards and activate them. And then every
time they expire, half a dozen places I pay automatically by credit card don't
get paid because my credit card has expired.
Why can't they give out credit cards that last forever? -- Shauna
Dear Shauna,
Some of the most frustrating things about credit cards have
to do with expiration dates. For example, if you pay a bill automatically once a
year on your credit card and your card expires annually, your card is expired
every single time the biller tries to use it!
One reason credit card companies
send you a new card is that the old card physically doesn't last forever.
Within about three years, the magnetic stripe on your card may stop working and
your card may start to delaminate. "Cards are set to expire based upon an issuer's experience with physical
card wear and tear," says Gail Hurdis, communication and public affairs representative, Chase Card Services. "These dates allow the issuer to proactively replace
cards on a timely basis prior to the magnetic stripe wearing out, or images
becoming worn due to use."
Many
department stores have credit cards without expiration dates. They just send
you a new card every couple of years. However, banks that issue credit cards
have another, greater concern: protection against fraud. There's a limit to how
much damage a person can do with a clothing store card. A crook with a bank
credit card can make purchases anywhere in the world, and possibly even take
out cash advances before he is stopped. That's why they need an additional
measure of security.
"The
expiration date is used by merchants and issuers to validate that a card is
open (through physical presentment at point of sale) and valid (through
real-time authorizations), which also protects customers against fraud,"
says Hurdis. "Fraudsters can get their hands on card numbers more
easily than they can expiration dates; if counterfeit cards are created and don't
have a valid expiration date, the card will be declined."
It looks like we're stuck with those pesky expiration dates --
and subscription services that come to a halt every time our cards expire. We
can take steps to make the process less painful, however:
Choose
cards with longer intervals between expiration dates. "Expiration
dates can be in the range of two to 10 years, but are typically three to five," says
Hurdis. Putting your automatic payments on your card with the longest life
will cut back on some hassle and potential service interruptions.
Make a
list of your automatic payments so you can update them the moment you get
a new card. I confess, I have noticed the problem only when my Boingo
wireless account stops working at the airport, or I get a notice that an
automatic payment has been declined. Being proactive would result in less
frustration for me and my creditors.
Expiration dates can be to our benefit if we use them as our
opportunity to re-evaluate where all our money is going. The scary thing about
automatic payments is that it's so easy to sign up for services -- domain names
we meant to use, gym memberships, online subscriptions, dating services -- and
forget about them. How many years could we keep paying $20 here and $30 there
before we notice and cancel the ones we don't need anymore? That adds up!
Credit card expiration dates are here to stay. They are just
one more reason for us to always be aware of what is being charged on our
credit cards so we can update our account information if necessary or remove
unnecessary automatic charges when we no longer need them.
Sally Herigstad answers questions about credit every week for CreditCards.com. Herigstad is a certified public accountant, author and speaker. She also writes regularly for MSN Money, Interest.com, Bankrate.com and RedPlum.com, and has been a guest on Martha Stewart radio and other programs. You can read more about personal finance and download free budgeting worksheets at her website: www.sallyherigstad.com
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
Published: April 24, 2009
Three most recent To Her Credit stories:
Should one spouse take on full debt load? – A married couple with joint card debt wants to transfer the balance to a lower rate card. Should the better credit score spouse take on the burden alone? ...
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