Why do credit cards have expiration dates?
To Her Credit
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
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.
See related: The short, unhappy life of a credit card
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
Published: April 24, 2009
- Quick fixes for temporary repayment problem – When life throws a curveball and you can't pay your bills one month, here's what you can do ...
- Getting a refund tougher if you buy with debit card – Late or nondelivery refunds not fully guaranteed with debit purchases ...
- Don't tap IRA to pay back taxes – Cashing out IRA may cause you to end up with yet another tax bill ...