Innovations and Payment Systems

Visa expands no-signature-required credit card transactions


That once-familiar credit card ritual — signing for your purchases — will become a rarity for purchases under $25 — and that has some fraud experts worried.

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During the peak winter season, things can really start hopping at Michelle Kline’s Fantastic Sams hair salon in Bradenton, Fla.

With only two or three stylists on duty and clients coming and going, allowing customers to make a credit card purchase of $25 or less without signing a receipt “probably would save time at the cash register,” Kline says.

That soon will be possible as Visa announced this week it was opening up the No Signature Required program to 98 percent of the more than 800 categories of retailers because “we are consistently looking at offering merchants payment options or combinations of options that help them meet their business objectives, best fit their payments environment and meet customer needs,” company spokeswoman Erika White said in an e-mail.

Some of the new retailers that will be eligible for the program include department stores, hair salons, electronics stores and sporting goods shops.

Between now and July, Visa is updating its systems to handle the new retailers and educating financial institutions and merchants about the expanded program, White wrote.

MasterCard’s similar program

MasterCard has a similar program in place with its Quick Payment Service program, which was introduced in 1991 and has expanded over the years to include locations such as convenience stores, supermarkets “and a wide variety of other merchant categories where speed is essential,” MasterCard spokesman Tristan Jordan said by e-mail.

Under the MasterCard program, no signature is required and a receipt is optional for transactions with a limit of $15 to $50, Jordan said, depending on the merchant category (known in the industry as MCCs or merchant category codes.

Not everyone is wild about such programs. Linda Foley, founder of the Identity Theft Resource Center in San Diego, says that as a consumer, “it does make me nervous” when she isn’t required to sign for a credit card purchase. By not signing, there is no signature on a receipt for the cashier to compare to the one on the back of a credit card.

“Thieves will go for these small purchases, and they can add up quite quickly,” Foley says.

More ‘small increment’ fraud?

Jeffrey Sklar, who oversees the fraud analysis and financial forensics team for the Bellmore, N.Y., accounting firm Sklar, Heyman & Co., says a consumer can be vulnerable if he loses his wallet or forgets his credit card somewhere. If a signature is required for a transaction, and the one on the card doesn’t seem to match the one on the receipt, a clerk can always ask for additional identification.

It doesn’t help that many consumers don’t look at their credit card statements, or only give them a cursory glance, Sklar says. Or in the case of spouses examining the charges on a joint credit card, they typically aren’t going to question a minor purchase at a service station or drugstore.

“Most fraud is really done in small increments. This tends to be undetected,” Sklar says.

If a consumer does detect something is amiss, a credit card issuer usually isn’t going to take the time to investigate the matter. “Is it worth spending five hours to dispute that $22 claim?” Sklar asks.

Owen Brunette, a payment systems consultant with SwarmPoint, a New York-based consultancy, says banks and credit card companies set such programs based on the risks involved. “There is a far greater risk for a leather goods or camera shop than there is for a local Thai restaurant or candy shop, just because of the greater ability to resell the goods. Anything worth less than $25 is just not worth trying to resell.”

White said that since the No Signature Required program was introduced in 2003, “we’ve seen no bump in fraud and that’s why we are comfortable expanding the program to the benefit of cardholders and merchants.”

See related:  Should you write ‘See ID’ instead of sign your card?, Contactless credit cards spark privacy concerns, Anatomy of a credit card

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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