42

The more I think about it, the more it seems to me that credit card information is among the least worrisome type of personal information belong to any consumer.

If someone's credit card number is somehow stolen, my understanding is that he's legally protected against fraudulent charges, and really, there is literally no piece of personal information on the card except the person's name (which is already pretty public) and signature (which many people don't bother with filling out anyway).

Given this, you'd think the consumer doesn't need to worry about this at all.

But it seems like credit card companies beg to differ.

For example, Bank of America says:

Stay Protected

We block potential fraud if abnormal patterns are detected and let you know if we suspect fraudulent activity.

Citi has a similar wording:

$0 Liability on Unauthorized Charges

You're completely protected against unauthorized charges on your account. At Citi, you will not be responsible for a charge that you did not authorize, online or otherwise.

Heck, they go even further when advertising their Virtual Card Numbers:

Why use Virtual Account Numbers?

By using Virtual Account Numbers, you get peace of mind knowing that your actual credit card number is never revealed to merchants.

(italics mine)

But... why should a consumer ever bother worrying about these in the first place, when he knows he legally can't be held responsible for fraudulent charges? What exactly is this new "peace of mind" that he supposedly gets by (say) using features like virtual account numbers that he doesn't already have? Should a consumer put any effort into worrying about this at all? (Why?)

  • 6
    Makes it seem like the company cares about you. All of this is to protect the card issuers. The only way people would use it is if they think it helps them some how. Notice how all the benefits can't even be measured? They are feelings. – Eric Dec 23 '16 at 7:51
  • 11
    Customer CAN be held responsible for the fraud. There often is a point in the agreement where you promise to take reasonable care to protect the card secrecy, so gross negligence from your side removes responsibility from the bank. Eg posting photo of your brand new card on Facebook. Or writing a PIN on a piece of paper and keeping it in same wallet. – Agent_L Dec 23 '16 at 9:17
  • 1
    @Agent_L: Good point! Note that we're talking about credit cards, though, and in the US credit cards don't generally have PINs -- they use signatures instead (and you're supposed to also sign the back of the card, for the seeming convenience of the eventual thief...). – Mehrdad Dec 23 '16 at 9:35
  • 11
    There is an old (sexist) joke about how a man never reported a stolen credit card to the card company because the thief was charging less per month than his wife used to. – Dilip Sarwate Dec 23 '16 at 16:22
  • 2
    Since the trigger just got pulled.... I'd like to take an unscientific poll while we're here. If you are female and bothered by the joke above, please take a moment to upvote this comment. I'm curious how offensive people find the joke. – Mehrdad Dec 25 '16 at 2:16
33

Recovering after a card number has been stolen is a nuisance; you need to wade through determining which charges are and aren't legit, update the records of anyone who legitimately has your card on file, not have the card available until the replacement reaches you, etc. And you may be on the hook for the first $50 of the loss, if I remember correctly, unless (as mentioned) the bank waives that.

Plus the risk that the card could be the first step in a larger identity theft attempt.

And not everyone is so blase' about the bank losing money. Those costs get passed on to us, remember. And some of us actually respect our banks or credit unions.

Certainly cards come with some consumer protection, otherwise nobody who thought about this would want to use them. But it's still worth exercising reasonable care to keep the problem from arising.

  • +1 Haha, you make good points, though I want to point out that it's really not about being blasé about banks losing money, and more about figuring out what constitutes "reasonable care" from a consumer's perspective. Personally, I've actually been using virtual card numbers for almost all my (online) purchases for a long time, and only recently did it hit me that what I'm doing might be overkill (hence this question). It's just a tradeoff issue. – Mehrdad Dec 23 '16 at 8:23
  • 4
    +1 for the annoyance of updating all the places that your card is on file, and for respecting the bank's money. I think the $50 amount is the liability limit by law, but all four of the major U.S. credit card issuers (Visa, MC, AmEx, Disc) have standardized on $0 fraud liability. – Ben Miller - Reinstate Monica Dec 23 '16 at 8:37
  • @BenMiller: Ahh, didn't know. Thanks for mentioning that! – Mehrdad Dec 23 '16 at 8:45
  • 3
    Another hassle: I had a card compromised, they sent a replacement. I asked about the automatic payments I had set up, I was told they would continue. Card declined, past-due notice in the mail, what?!?! Turns out the automatic payment didn't actually carry over, but was reestablished on the new card using the information they had on file. This took too long, it wasn't reestablished as of the date they should have done it. Fortunately, when I squawked they saw their error and waived the interest and penalty. – Loren Pechtel Dec 23 '16 at 21:47
55

I have some experience with this. I have had fraudulent charges appear on my credit card statement and had to change my card number several times, despite (I believe) no carelessness on my part. Every time that this has happened, I have never lost a penny due to fraud on my credit card. The bank has ultimately removed the fraudulent charges in every instance.

Given this, you'd think the consumer doesn't need to worry about this at all. But it seems like credit card companies beg to differ.

Yes, because although I have never lost a penny to fraud, the bank (or the merchant) loses money every time it happens. The $0 liability protects you; the card security measures protect the bank.

But... why should a consumer ever bother worrying about these in the first place, when he knows he legally can't be held responsible for fraudulent charges? What exactly is this new "peace of mind" that he supposedly gets by (say) using features like virtual account numbers that he doesn't already have?

Although you shouldn't end up out any money when this happens, it is an inconvenience. The bank will cancel your card and issue you a new number. It may take a few days for you to receive your new card. If you have another card to use, this isn't a big deal. If you are out of state the day before you need to check out of a hotel and return a rental car with no backup credit card (as I have been), it is a big deal. (In my case, I had to have the credit card company talk to the hotel to give them the new card number, and they were able to overnight me a new credit card so I could get home. I now make sure I carry a backup credit card.)

Should a consumer put any effort into worrying about this at all? (Why?)

In my opinion, it makes sense to be careful what you do with your credit card number, if only to avoid the inconvenience. Don't type your credit card number into an e-mail message, for example, and only use it on websites that you trust. That having been said, it is not worth it to be paranoid about it, either. No matter how careful you are, eventually you will probably use it at a store that gets hacked, or your card will get skimmed somewhere, and you'll need to get a new credit card number.

The best way to protect yourself is to make sure that you go over your credit card statement each month and look for any fraudulent charges that the bank didn't catch.

  • 1
    I think you worded it well by saying you shouldn't end up out of money. The important implication here is that while the changes are low, you still may charged be since no system is perfect. – David says Reinstate Monica Dec 23 '16 at 14:45
  • Getting a backup card when going away from home is an excellent piece of advice people often overlook. nice. – Mindwin Dec 23 '16 at 16:02
  • Morality is an obvious reason for consumers to care, and is missing from both the question and this answer. It is a bad thing for society if criminals can get rich by taking other people's money - even if the other people are a credit card company or a bank. Perhaps there are only weak reasons of self-interest to protect your card number, but you should still protect it for the same reasons that you'd call the cops if you saw men breaking into a local jewelers. – Mark Amery Dec 23 '16 at 21:57
  • 4
    @MarkAmery Yes, I agree, it is wrong to intentionally put the bank's money at risk. At the same time, we consumers are not the ones who designed the modern credit card system with all of its inherent security flaws, nor are we the merchants who put their customers' data at risk. It is not our responsibility to bend over backwards to protect the banks from their own system. – Ben Miller - Reinstate Monica Dec 23 '16 at 22:37
  • 3
    "The best way to protect yourself is to [..] go over your credit card statement each month" - A better, more modern option is to sign up for credit-card email alerts. I get an immediate email every time my credit card is used. – BlueRaja - Danny Pflughoeft Dec 23 '16 at 22:52
11

The biggest reason to protect your credit card number is for your personal convenience. Replacing cards, even if there is no immediate dollar-consequence, is time consuming, so there IS a cost unless you do not assign value to your time. Additionally, repeated fraud may cause your financial institution to decide you're an above-average fraud risk and close your account. This costs more time and credit checks, etc., to apply for a new card.

  • 1
    The bank has replaced our cards 5 times in the past few years without closing our accounts. (That might be because I keep a close eye on the cards since I log in frequently to manage our money.) – RonJohn Dec 23 '16 at 17:55
9

In many cases, you can be temporarily out of pocket by significant amounts. Even if you then get the money back, there may be difficulties or consequential costs that aren't covered. For example your card gets cloned and maxxed out while travelling, leaving you without your most effective means to pay for necessities. You're left paying over the odds to withdraw cash on your debit card (if you can even get enough out at a time e.g. India at the moment) or you have to get money wired to you.

At the same time you can't really protect your card number. You can't even keep your card in sight in some places, never mind protect against the card number being displayed/recorded locally by the card machine.

  • +1 This is the huge advantage of a credit card over a debit card. In both cases, you have $0 liability ultimately, but with a debit card you could find your checking account temporarily empty. – Ben Miller - Reinstate Monica Dec 24 '16 at 17:16
9

TL;DR.: Because eventually the CC issuer will pass the fraud bill to the customer, in the form of increased fees and/or taxes.


Even with no liability in the case of fraud, the customer should put effort into security measures with their card.

The expense from fraud may be the sole burden of the credit issuer / bank as per Ben Miller's answer, but this expense will someday find its way into the customer's pockets:

Disclosure, i work at a bank.

  • A banks' best ability probably is risk management. The ones that were bad at this probably went under in the last four decades. With regulations such as SOx, Basilea, and others, it is impossible for a bank to neglect risk management.

  • Every expense, including operational losses, a bank incurs will reflect in increased fees / interest rates for the customers. So in the case of a sharp raise of credit card fraud, the banks will soon take measures to reduce these losses. That may mean canceling the cards of high-risk groups of customers, increasing fees or interest.

  • A particular customer that is often the target of fraud (way more than the average for that customer's demographic) will probably see his card not renewed or even cancelled, or his limits decreased and/or rates/fees going up.

  • 1
    The focus of this answer is exactly what came to my mind when first reading the question. Fees will always trickle down to the user in some form of another. As a brief thought for readers, keep in mind that someone else's interest accumulated on their credit card is part of the reason why we (anecdotally, the US) can get cards with good-to-great rewards. – Xrylite Dec 23 '16 at 22:05
  • It seems sort of backward to say the expense will find its way into customers' pockets. – Wildcard Dec 24 '16 at 0:25
  • Businesses can't just "pass on" costs. If they could charge you more money, then they would just charge you it. Their costs don't influence what consumers are willing to pay any more than having an expensive mortgage means you charge higher rent. It doesn't work like that. – Kat Dec 24 '16 at 7:53
  • 1
    @kat that is what we call "inflation". Business pass increased costs over all the time. The reason they can't charge more is because the guy next door charges less. Once the costs and risks of banking operations go up, so do the interest rates and charges. – Mindwin Dec 25 '16 at 14:35
  • 1
    @Kat Businesses never do anything else other than pass on costs. They find newer and clever ways to do so, like changing package size and cost-per-ounce at the same time, changing packaging, using marketing to create the impression of greater value for a product to accompany a price hike, etc. Banks in particular restructure their fee schedules, roll out new web sites and new products, etc all as a way of masking the fact that they are charging more. – barbecue Dec 25 '16 at 17:42
5

If you have any automated, recurring payments attached to the credit card, having the number cancelled can result in major losses - for instance, domain name expiration, VPS deletion, deactivation of mobile or VoIP phone service, etc. Good providers will give you a warning and plenty of time to replace the payment method on record, but I wouldn't necessarily trust them all to handle it well.

  • 2
    It used to be a huge inconvenience for me to figure out all the places where I had my credit card on file for recurring charges. After a few instances of this, I got smart and kept a list. Now when it happens, it takes about 10 minutes on the computer to update everything. Also helpful when your card gets a new expiration date. – Ben Miller - Reinstate Monica Dec 24 '16 at 14:51
  • The reverse is often a problem. I have had fraudulent recurring payments show up on my card. CC companies are often unhelpful about this kind of thing, and many people who have had this problem report that although they change their CC number in an effort to stop the charges, that doesn't work, because the CC company automatically transfers the charges to the new number. – Ben Crowell Dec 24 '16 at 22:46
  • @BenCrowell: Citation needed. I'm not aware of any mechanism for recurring payments on the card issuer side. Recurring payments are implemented on the payment-processor side. When your card is cancelled and reissued with a new number, having the old number does not enable a merchant/payment processor to make charges on the new card. – R.. Dec 28 '16 at 4:30
  • 1
    chasepaymentech.com/account_updater.html developer.vantiv.com/docs/DOC-1320 (@BenCrowell) Note: this is mostly a recent development; according to my sources, it was rare until about 2010 and has grown substantially since then. – dave_thompson_085 Dec 15 '17 at 11:37
2

I've had a card cloned 15 years ago and used to buy over 5k of goods in another country. So the inconvenience of having a card closed and re-issued is quite annoying even though the charges were reversed and I was made whole.

But these days most CC fraud isn't from a card scanned by a waiter and cloned then used elsewhere. Mostly it is poorly secured databases or point of sale terminal malware. The latter is getting curtailed by chipped cards and the largest source of fraud is now online transactions (so called card not present) where the merchant has your CC number. If their system is breached the bad guys have a wealth of card numbers they sell in an E-bay like site on the dark web. This is where the Citi virtual CC comes in handy. Here's how it works to protect the bank and the hassles you go through when a card as to be re-issued.

Citi's virtual CCs let you generate an actual credit card, complete with security code and expiration date. What is unique is that once the virtual CC is used it can only be used subsequently by that same merchant and is declined by any other. You can also set a total limit on what the merchant can charge as well as an expiration date. I use them for all my online accounts because they are, for all practical purposes, immune to the malware that steals CC info. Even if somehow the virtual CC is used before the merchant makes the initial charge that locks in the CC to their account the charge can be reversed without closing your actual card which has a different number.

You can manage multiple Citi virtual CCs and view charge status, close, or adjust limits over time so managing them is quite easy with no risk to your primary account.

  • +1 Thanks for explaining how the virtual CCs work. I don't have them available to me on my card, but if I did I would probably use them. – Ben Miller - Reinstate Monica Dec 28 '16 at 3:38
-1

Not much. With credit cards, there is generally no liability to the cardholder for unauthorized purchases. Random stolen credit card numbers are only worth like $5 on the black market. They're so ubiquitous. And they're compromised at the card issuer a lot of the time, so even if you never use the card, and destroy it immediately upon receipt, it can fall into the wrong hands. Card issuers are getting better at identifying fraud and proactively alerting customers, so it can be difficult to get a lot of mileage out of them. I wouldn't lose any sleep over protecting my credit card. I'm very familiar with stolen credit cards by trade (fraud prevention), and just assume my credit cards are compromised at all times.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.