Exploring the cultural impact of credit cards
New credit cards are sticking around longer in consumers’ wallets. Why? The change to chip cards has made them more durable, and that means card expiration dates can be longer, too.
“Historically, mag stripe cards had a reissue cycle of about three years, because that’s when the cards really started showing their age,” explains Jack Jania, senior vice president of strategic alliances for card manufacturer Gemalto.
“When the cards went to chip, because chips are a little more rugged, we saw the mix of reissue dates go from 3-4 years to typically a mix of 3-5 years.”
Chase Card Services spokeswoman Lauren Ryan confirmed: “We are working to move all of our card reissues/new account issuance from three- to five-year expiration.” Major card brands American Express and Mastercard declined to comment.
But as we’ll see, the next wave of payment technologies mean the whole concept of expiration dates may be running out of time.
Tips to avoid card expiration disruption of service
The importance of expiration dates
Card issuers have long known that consumers pay little attention to reissue dates unless a card expiration stings them on a card-on-account autopay. However, technology has conquered that inconvenience as well.
“The expiration date on your card is not an expiration date for your account; it’s just an expiration date for the physical card itself,” says Jason Oxman, CEO of the Washington, D.C.-based Electronic Transaction Association (ETA).
“If you have a recurring payment and your merchant, like Netflix or the cable company, subscribes to one of the card network’s account updater services, when your card expires, you can still generate charges on that card.”
All four major credit card payment processing networks offer an account updating service. If the customer’s card number or expiration date changes, they will update that information for the merchant, so your monthly gym payment continues to go through.
These account updaters are, however, services that merchants have to enroll in and pay for. A cardholder’s automatic payment won’t go through unless the merchant is enrolled in an updater service.
That said, as Discover explains, the positive effects of an expiration date “may change your mind about what many people view as an annoyance.”
Card expiration dates serve three primary functions:
- Fraud protection
The month/year expiration date on your card, along with your name, address, card number and security code, helps online and card-not-present merchants verify that you are the actual cardholder, without exposing your account number. Grouping cards into expiration date portfolios also enables card issuers to better respond to data breaches. Replacing lost and stolen cards factors in here as well.
- Card improvements
Reissue dates can be timed to maximize upcoming marketing/design changes to the issuing bank’s name, logo or look, as well as promotions and payment technology upgrades, most recently the chip card. The reissue contact also gives card issuers an opportunity to review and trim off customers who become credit risks and encourage more use from inactive accounts.
“It’s a portfolio management measure,” Jania says. “It’s pretty typical that 20-30 percent of the credit cards that are issued into the marketplace on any given year are never activated. So, these accounts, albeit dormant, remain on the books of financial institutions and never get any transactions on them. Expiration dates are another good way to purge them.”
- Card deterioration
Card-issuing financial institutions recognize that PVC cards take a beating. According to Jania, magnetic stripe cards degrade in about three years from swipe-wear and wallet-grind, while chip cards may last slightly longer because their terminal insert is less abrasive.
Video: Credit card torture test
Longer reissue dates translate into a win-win for card issuers and consumers alike.
“It’s less work,” says Jania. “Typically, if your card is already enrolled in an e-commerce site, they will track your expiration date, and when you try to use it, they’ll say, \u2018Your card has expired; please update your information.’
“If the card issuer postpones reissue by a year, you’re still going to have to go through and update those [autopay] sites; it’s just how often you’d do it. You’d postpone it by a year or two.”
Mother Earth would benefit as well from a significant annual reduction in toxic PVC card waste in landfills.
“U.S. consumers carry 1.5 billion debit, credit and prepaid cards in their wallets today,” Oxman notes. Unfortunately, credit card recycling remains largely a nonstarter.
Could expiration dates expire?
Just as e-commerce technology has helped consumers avoid those annoying “NSF” messages when they discover their card on file has expired, the next wave of payment innovation may one day render card reissue dates as obsolete as mag stripes.
“The plastic card traditionally has been the touchpoint for new technology, but that’s not necessarily the case anymore,” says Oxman.
“In the mobile world, obviously you don’t need the expiration date, because there are additional security measures such as tokenization, which protects the card information and ensures its validity, and biometrics, where if you’re using Apple Pay, Samsung Pay or Android Pay, you validate who you are with your thumbprint or a picture of your face.”
Ironically, Jania’s already seeing the next step toward timeless cards being shipped on the coattails of the great U.S. chip card conversion.
I’m noticing more interest in providing replacement cards with contactless (“tap-and-go”) technology on them, basically because of speed and ease of use,” he says. “You’re actually seeing [reissue] portfolios starting to change because of this.
“Contactless cards do the security things that chips do; they’re just easier to use. You only have to tap the point-of-sale terminal, so the wear on the card is going to be less as well.”
Neither Jania nor Oxman sees the card expiration date itself disappearing anytime soon, though its presence will become more ceremonial than functional.
“As long as the physical plastic card remains a popular way to pay, I think we will continue to have expiration dates because the three reasons [fraud protection, card improvements and card deterioration] are so important,” says Oxman.
“As we move to a world beyond cards, they become less important, but we’re a long way away from the total disappearance of the plastic card.”