Why credit cards have expiration dates
Fraud prevention is the top reason. But they also give card companies another chance to check up on you.
This post comes from Gerri Detweiler at partner site Credit.com.
Why do credit cards have expiration dates? If you're like me, you probably haven't given it much thought, or even paid attention to that date until you get a new card in the mail -- or noticed that the one you have is about to expire.
But issuers take expiration dates seriously; turns out, they have to. Here are four reasons that credit cards expire.
Reason 1: Fraud prevention
This is the top reason you're likely to hear when asking this question. "They are mandated by our operating agreements with Visa and MasterCard to help protect against fraud," says Natalie Brown, spokeswoman for Wells Fargo.
How do they do that? "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)," says Marcy Cohen, a vice president and senior business leader of worldwide communications for MasterCard.
She explains, "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." (Post continues below.)
Reason 2: Another chance to check up on you
"A limited-term expiration date of, say, three years -- typical -- allows the creditworthiness of cardholders to be re-evaluated on an ongoing basis, in addition to the normal annual review," says Bob Hammer, the founder and CEO of R.K. Hammer, a bank card advisory firm.
While in the past you'd often get a generous credit line increase when a replacement card arrived, more recently some cardholders have received a new card with a lower credit line. But if your credit is strong and you've kept your account active by using it from time to time, you probably don't have anything to be concerned about.
And don't worry that your card issuer might arbitrarily raise the interest rate or add an annual fee to your card when it renews. That's not allowed, thanks to protections offered under the Credit CARD Act.
Reason 3: So you can use it
Depending on how often you use your card and where you keep it when you're not using it, the plastic may take a pretty good beating. "Cards wear out and the mag stripes cannot work forever, so cards need to be renewed," says Cohen. "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."
Hammer adds that a "plastic card has only so much life expectancy before the mag stripe and tipping (the painted name and numbers on the face of the card) deteriorate, and would need to be reissued anyway."
If an issuer gets the new card to you before the old one wears out, it's less likely you'll reach for another piece of plastic in your wallet.
Reason 4: To get a facelift
If your new card looks prettier than the previous one, there's a reason for that.
"Card designs are also refreshed periodically, and the replacement schedule also helps keep the cards looking up-to-date," says Brown. You might like that flashier piece of plastic enough to pull it out of your wallet and use it more often. At least that's what your issuer hopes.
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