Don’t be surprised if the next credit card you get from your favorite store is missing something.
Like an expiration date.
Take credit cards from Macy’s. The Cincinnati-based department store chain recently eliminated expiration dates when it reissued all of its private label cards in the color red to match its marketing theme.
Spokesman Jim Sluzewski said the retailer had been using expiration dates as a trigger for an account review to determine if a customer’s spending level had changed, requiring a different color card to reflect the correct tier of Macy’s loyalty rewards program.
Now that all of Macy’s cards are the same color, expiration dates “don’t serve any purpose,” he said.
Industrywide, most credit cards have still expiration dates, but they’re only required for network-branded cards, such as those with the Visa, Mastercard and American Express logos.
When it comes to private label cards, retailers set many of their own rules, said Ken Paterson, head of research and credit advisory services at Mercator Advisory Group, a credit card consultant outside of Boston.
Industry experts cite two main benefits of using expiration dates.
First, they help with fraud protection by providing another layer of authentication, especially for phone or online purchases.
The other main reason they’re used is that over time, magnetic stripes and raised account numbers on the cards tend to wear out. Replacing the cards on a scheduled basis helps ensure they’re working properly.
Card issuers also may use expiration dates as an opportunity to review a customer’s creditworthiness and adjust credit limits up or down. Reissuing cards also can be a chance to reestablish contact with customers in the hope that the arrival of a new card — often with a new design — will spur more use.
Sluzewski at Macy’s said expiration dates aren’t as important for private label cards as they are for network-branded cards. Because store cards are only good at a particular retailer, instead of at millions of locations like general purpose credit cards, there’s less risk of fraud, he said. And because store cards aren’t swiped as much, they don’t wear out as quickly.
Experts say the chief advantage of dropping expiration dates is saving money.
Card issuers don’t “incur the additional expense of replacing cards that may still be functionally useful past that (expiration) date,” said Gerri Detweiler, personal finance expert with the education site Credit.com, who said she has Home Depot and Target cards that don’t carry expiration dates.
Besides the cost of the card, replacement costs include updating customer records and mailing and reactivating the cards.
Cards with expiration dates typically are reissued on a three-year cycle, but that could be changing, too.
As the U.S. card industry transitions from magnetic stripe technology to smart cards with embedded microchips, consumers likely will see expiration dates extended to four or five years, said Marianne Berry, managing director for the global payments practice at Auriemma Consulting Group in New York City.
Chip cards, which have been the norm in Europe and other parts of the world for some time, offer greater protection against fraud and also tend to last longer because even though they get scanned by card readers, they don’t get swiped.
For now, most chip cards issued in the U.S. also will contain a magnetic stripe so the cards still can be used at merchants that have not upgraded to chip readers, Berry said.
Chip cards are expected to become increasingly prevalent late this year and into next year, approaching the October 2015 deadline set by Visa and Mastercard for most retailers to install new payment terminals, she said.
The card networks say that merchants that miss the deadline will bear the cost of fraudulent transactions.
“If you don’t upgrade to the latest, strongest authentication technology, then you are more likely to be the liable party because you have the weaker security,” Berry said.
Source: MCT Information Services