Saturday, January 31, 2009

Visa Security Keeps Cardholders Safe

Visa credit card holders can take comfort in the fact that their security is in good hands. Visa's security program uses a number of methods to ensure that your Visa account information is never compromised.

Visa Continuous Monitoring

Visa's Continuous Monitoring is a key part of its multiple layers of security. Alongside other fraud monitoring tools, Visa can often spot fraud based upon unusual card transactions. By identifying items that are outside the cardholder's typical purchasing pattern, Visa can note fraudulent activity as quickly as possible. This acts as an early-warning system to identify fraudulent activity.

Visa does this by working alongside financial institutions and merchants to continually monitor your account to detect suspicious or unusual activity. By doing this, Visa is able to function pro actively to stop fraudulent transactions. Among the red flags that may signal fraudulent activity are:

  • The shipping address does not match the credit card billing address, or the shipping address has suddenly changed.
  • A significantly larger purchase compared to the normal purchase patterns for the account.
  • A change in the name on the credit card account.
  • A change in the birth date or social security number on the account.

While Visa is always on the lookout for fraud, you can play a role as well in your own protection. Since most identity fraud is self-detected, you can act as your own fraud monitor by paying careful attention to your bank statements, particularly online. According to a recent report by Javelin Strategy and Research, accessing your account online can provide easier identity theft protection than simply looking over monthly paper statements and bills. Should you notice a suspicious transaction, immediately contact your financial institution to report it. By following these simple steps, you can better protect your credit card from unauthorized use.

Visa Identity Theft Assistance

Another important layer of the Visa Security Program is Identity Theft Assistance. If you are the victim of identity theft, help is available. Through a unique partnership with the consumer network Call For Action, identity theft victims have access to free, confidential counseling by dialing 1-866-ID-HOTLINE.

Call For Action's consumer hotline offers access to help from trained counselors to guide consumers step-by-step through the process of recovering their identities. You can also get assistance from Call For Action via their website.

Visa 3-Digit Code

Yet another layer of Visa security comes in the form of the Cardholder Verification Value, or CVV2. This 3-digit code found on the back of your credit card inside the signature area helps ensure the physical credit card is in the cardholder's possession when shopping online or making purchases over the phone, helping to prevent unauthorized or fraudulent card use.

While the signature panel on the reverse side of your credit card typically has a series of numbers, only the final three digits comprise the CVV2 code. When shopping online or over the phone, this code lets merchants know that the credit card is in the right hands. Merchants will ask for the CVV2 at checkout from the cardholder. Then, the information is transmitted electronically to the card-issuing bank to verify its validity. Within seconds, the CVV2 results are sent back with authorization. Should it be returned invalid, merchants have the right to stop the transaction. For the cardholder's added protection, merchants are prohibited from keeping or storing the CVV2 number following completion of the credit card transaction.

Common Credit Card Appearance

No matter what credit card you carry in your wallet (or the variety of credit cards you keep on hand for various purchases), it shares some physical characteristics with the cards used by consumers across the U.S. The common features of the many, many different credit cards in circulation are their size and the appearance of a number emblazoned across the front.

Credit cards have a similar size to one another because of an organization known as the ISO. The ISO, or International Organization for Standardization, is the standard-setting body of international representatives that produces global commercial and industrial standards. The ISO establishes standards for the size of credit cards and other ID cards, as well as determining what cards are made of and ensuring their standards are ideal for a wide array of uses.

The ISO is the reason your credit cards are made of PVC and are generally the same size across the board, which allows for easier processing and recognition. It also ensures that your credit cards remain standardized.

Credit cards also share a common numbering scheme. A credit card number contains a single-digit major industry identifier (MII), a six-digit issuer identifier number (IIN), an account number, and a single-digit checksum.

The Major Industry Identifier number corresponds to the issuer category. For example, a "1" denotes airlines, "2" airlines and other industry assignments, "3" travel and entertainment, "4" banking and financial, etc. American Express would fall into the travel and entertainment category, while Visa, MasterCard, and Discover Card are in the banking and financial category.

The first six digits of the credit card number (including the initial MII digit) make up the issuer identifier, which denotes the credit card network to which the number belongs. Some of the better-known issuer identifiers include:

  • American Express -- 34xxxx and 37xxxx
  • Visa -- 4xxxxx
  • MasterCard -- 51xxxx-55xxxx
  • Discover -- 6011xx

The maximum length of a credit card number is 19 digits, with the maximum length of the account number field being 12 digits (initial 6 digit issuer identifier minus the final digit check number). Each issuer has a trillion possible account numbers.

The final digit of your credit card number is a check digit, similar to a checksum. The algorithm used to arrive at the correct digit is called the Luhn algorithm, after IBM scientist Peter Luhn. The check digit is used to confirm the initial digits of the card number. The benefits of using a checksum is that it prevents casual attempts to invent credit card numbers, as only one in ten will be valid. Additionally, it serves to prevent mistakes when the credit card number is manually recorded.

Separately, credit cards feature issue and expiration dates, as well as extra codes such as issue numbers and security codes. However, not all credit cards have the same sets of extra codes used to identify that the card is authentic.

Wednesday, January 14, 2009

Credit Card and Debit Card Blocking

Sometimes, businesses will charge more on your credit card or debit card than what you actually authorize. If you have ever been told shortly after you stayed in a hotel or rented a car that you were over your credit card limit or had your debit card declined (although you knew you had available credit or money in your bank account), you could have encountered what is known as card "blocking." With blocking, a merchant does not actually take out all that money, but does prevent you from spending it in order to make sure they get paid. A block essentially reserves funds available through a credit or debit card to make sure cardholders do not exceed their credit limit, or, for debit cards, their bank account balance, before checking out of a hotel room or returning a rental car.

Usually, card blocking remains unnoticed -- but that could change if you have a card balance near your credit limit or have a low checking account balance when paying by debit card. If you are away from home on a vacation and without access to the Internet, you may have trouble figuring out how all your charges add up to an exceeded credit limit.

Credit card blocking generally takes place when a consumer checks into a hotel or rents a car, instances where a credit card or debit card is needed prior to actual payment. In such cases, the clerk usually contacts the company that issued your card to provide an estimated total. Once the transaction is approved, your available credit (when a credit card is used) or the balance in your bank account (when a debit card is used) is reduced by this amount. Hotels will estimate on the high side and can lock in the hold for three days or more, until your actual charges clear and are posted. This is a block, which some companies refer to as placing a "hold" on those amounts, and can quickly eat up your credit limit.

While some hotels will add a percentage of the room rate onto the hold, other will tack on a set dollar amount. For example, use of a credit card or debit card upon check in to a $100-a-night hotel room for a planned stay of five nights could mean that at least $500 would be blocked. Additionally, hotels and rental card companies often add anticipated charges for "incidentals" like food, beverages, or gasoline to the blocked amount. These incidentals can vary greatly among merchants. Meanwhile, restaurants run your credit or debit card before you tip and usually add on what they expect you to give. If they guessed too high, the amount is adjusted, although it can take a few days. Merchants set the hold amount, but banks choose whether to hold the funds and for how long.

Visa requests that financial institutions issuing its cards release all holds in under three business of the request or when the transaction clears, whichever comes first.

If you pay your bill with the same credit card or debit card you initially used when you checked in to a hotel, the final charge or amount on that card will likely replace the block in a day or two. However, if you pay your bill with a different card, or with cash or a check, the company that issued the card you used at check-in might hold the block for as long as 15 days after you've checked in. That happens because they were not informed of the final payment and did not know you paid another way.

Blocking is perfectly legal and does not require any disclosure. Sometimes blocking is also used by gas stations, by companies cleaning your home, and other businesses to make sure credit or account money will be available to complete payment.

Holds at self-service gas stations can be especially troublesome for debit card users, since they are not removed for up to three business days, until the gas station carries out a "batch" transaction that gives the bank the actual amount. According to the spokesman for the Consumer Action activist organization, oil companies vary in the hold amount, from $1 to $100.

If you are either nowhere near your credit limit or have plenty of money in your bank account, blocking is unlikely to be an issue. But if you are nearing your credit limit of have a low balance in your account, be careful. Not only can it be embarrassing to have your card declined, it can also be inconvenient, especially when you need to make an emergency purchase with insufficient credit or money in your bank account. With debit cards, depending on the balance in your bank account, blocking could result in charges for insufficient funds while the block remains in place.

In order to avoid the trouble that can result from credit card and debit card blocking, you can take the following steps:

  • When checking into a hotel or renting a car (or if another business asks for your card in advance of service) find out if the company is "blocking," how much will be blocked, how the amount is determined, and how long the block will remain in place.
  • Use the same credit card or debit card at the start of the transaction that you plan to pay with for hotel, motel, rental car, or other "blocked" bills. Find out from the clerk when the prior block will be removed.
  • If you do pay with a different credit card or debit card, by cash, or by check, remind the clerk that you are using a different form of payment and ask them to remove the block promptly.
  • Call your current card issuer to inquire if they allow blocks, for how long, and from what types of merchants. If they do, you may want to think about getting an overdraft line of credit from your bank. Ask about a plan that always automatically covers the overdraft and does not involve a separate bank decision on whether or not to pay it each time. Although you could incur some interest on this plan if you don't pay off the amount fairly quickly, you would not have an overdraft that goes unpaid. Talk to your bank about an overdraft line of credit, how it would work, and how much it costs.

To reiterate, when looking for a credit or debit card, it's important to consider whether the issuer permits blocks, for how long, and from what types of merchants. You may want a card from an issuer that uses shorter blocks.

Tuesday, January 13, 2009

Card Issuers Encourage Debit Card Signature Transactions

Debit cards provide a choice for consumers who make a purchase with their plastic. Debit card users can opt to go the "debit" route and enter their personal identification number (or PIN) when making a transaction. Or, they can decide to use their debit card as they would a credit card and sign for the purchase. When it comes to bank issued debit cards, there are a number of ways the bank encourages you to put down your John Hancock.

Upon first thought, there may seem to be little difference between keying in your PIN number or signing your name for a debit card purchase. But in fact, the decision could have an impact on your wallet.

With consumers increasingly choosing to make debit cards their plastic of choice (debit cards now make up over one-third of all card transactions), banks are looking for a way to increase business from this consumer choice. With experts noting that signing for debit purchases is more profitable for the banks, they are encouraging customers not to stick with the PIN.

Although banks make more money from signed debit card transactions, the extra cash is made off merchants, not consumers. Merchants pay higher fees when consumers choose to use their signature. With PINs, merchants pay credit-card companies and their bank partners a flat fee to process the debit transaction, generally between $0.10 and $0.50. However, the merchant fees for processing a signed debit transaction are a percentage (typically 2.49%) of the transaction value.

One method some banks use to persuade cardholders to sign for debit purchases is by charging "point-of-sale" fees for entering a PIN. These banks charge the consumer $0.25 to $0.50 per transaction, while other tack on a monthly fee of $1 to $2. Whether you personally will pay a fee could stem from which bank you use, where you live, and even the type of account you have. According to an estimate from the American Bankers Association, 13% of consumers pay such fees. Industry watchers note that although POS fees have existed for years, they have become more common as consumers make everyday purchases with debit cards. At present, only two of the largest U.S. banks have been charging POS fees -- Wells Fargo and U.S. Bancorp.

Meanwhile, banks are also using incentive programs like those offered for reward credit cards to spur signature-backed debit transactions. Signing for debit card purchases can reward consumers, including those whose cards bear the imprints of big names like Visa and Citi, with all sorts of rewards. However, with a PIN, rewards take longer to earn, if they can be had at all. So even if you pay a fee for your debit card, you could be missing out on rewards if you choose to enter a PIN when making a purchase. Therefore, it's important to read the fine print in your card agreement.

Monday, January 12, 2009

Credit Line Shouldn't Be Viewed as Part of Your Income

Too frequently, consumers view their credit card's line of credit as they do with their own paycheck -- as an amount of money they have to spend as they please. They may simply add their credit limit amount to their earnings total and decide the sum is how much they have to use for expenses and purchases. But such thinking is what gets many people into serious problems with credit card debt. Unlike using your own money, when you pay for something with a credit card, you are in fact borrowing from the card issuer to fund your purchase.

Your own money could come from sources such as your paycheck or earnings from investments. However, with credit card spending, you are paying using someone else's money. This is different than paying with a debit card or prepaid credit card, which either draws money directly from the consumer's checking account or from an amount of money pre-loaded onto the card. If you have trouble keeping yourself from burning through an entire line of credit, perhaps one of these other payment cards would be a good option for you.

Credit limits are often large numbers that can make you feel like you have the deepest pockets in the neighborhood. If you have a good credit history, getting one a sizable credit limit is not too difficult. Consumers may be rewarded for a solid credit history with a substantial line of credit when they apply for a new credit card. Or, they may have the line of credit on an existing credit card extended if they pay their bills on time and have proven to be an a low-risk borrower.

But before you begin swiping that credit card with the huge line of credit, think about how much money you actually have to spend. Don't ring up charges you will have to struggle to pay back with your own cash.

Having a large line of credit could be a problem for those consumers that have trouble only spending what they make or less. You do not (and most likely should not) spend as much as your credit limit allows. You will have to eventually pay this borrowed money back. When it is time to do so, where is that money going to come from? Remember that the line of credit extended to you by a credit card company is not the same as your personal income.

Sunday, January 11, 2009

Keep Your Credit Card Safe When Shopping For an Online Bargain

Most credit card users already are aware that their credit card information could be at risk on the Internet if precautions are not taken. News stories have focused on major security breaches that endangered consumers with loss of personal financial data. But what many financial fraud experts are warning is that hackers are increasingly targeting small, commercial Websites.

In certain instances, fraudsters are able to gain real-time access to these small websites transaction information, enabling them to steal valid credit card information and hastily ring up large numbers of fraudulent charges.

Identity thieves may have fewer potential victims at smaller websites, but they are often able to operate with greater ease due to potentially less robust software the sites use for online order processing, or due to a dependence on outsourced Web site security. Fraud prevention professionals note that many smaller websites sometimes rely on generic shopping cart software that they neglect to update with the latest software security patches.

For victims of identity theft, a stolen credit card number is often just the first step a thief will take. Generally, the criminals who steal credit card information do not use it themselves, but instead sell it along with many other card numbers to other scammers. The theft of credit card data, combined with other personal information, can allow identity thieves to gain additional information about their victims, according to experts.

Identity theft victims may find that criminals make charges at websites that sell online background checks on consumers. These background checks can help fraudsters create a more complete file on a victim to aid further in identity theft or establish a more appealing record for re-sale in the identity theft underworld. Thieves who start with a credit card number may also get ahold of the a phone number, address, e-mail address, and other data that can be used to gain further information on the target or open up new lines in the victim's name.

Regardless of the prevalence or sophistication of internet criminals, risk can potentially be mitigated by only shopping online with merchants you trust (i.e. larger, established retailers) and that have secure checkout pages. It may also be a good idea to closely monitor your credit report activity on a quarterly or even monthly basis with the three major credit bureaus to ensure no one is trying to establish unauthorized credit in your name.

Saturday, January 10, 2009

Credit Card Dangers May Lurk on Smaller Websites

Most online shoppers are cognizant of the fact that their credit card information is usually safeguarded and feel justifiably confident when performing e-commerce transactions. Despite news stories that have focused on major security breaches that endanger hundreds of credit card numbers, online shopping continues to prosper. But what many financial fraud experts warn is that hackers are increasingly targeting small, commercial Websites in search of unprotected credit card numbers.

In certain instances, fraudsters are able to gain real-time access to these small websites transaction information, enabling them to steal valid credit card information and hastily ring up large numbers of fraudulent charges.

Identity thieves may have fewer potential victims at smaller websites, but they are often able to operate with greater ease due to defects in the software the sites use for online order processing, or due to a dependence on outsourced Web site security. Fraud prevention professionals note that many smaller websites rely on generic shopping card software that they neglect to update with the latest software security patches.

For victims of identity theft, a stolen credit card number is often just the first step a thief will take. Generally, the criminals who steal credit card information do not use it themselves, but instead sell it along with many other card numbers to other scammers via underground chat rooms. The theft of credit card data, combined with other personal information, can allow identity thieves to gain additional information about their victims, according to experts.

Identity theft victims may find charges made at websites that sell online background checks. These consumer background checks can help fraudsters create a more complete file on a victim to aid further in identity theft or to establish a more appealing record for re-sale in the identity theft underworld. Thieves who start with a credit card number may also get hold of a victim's phone number, address, e-mail address, and other data that can be used to gain further information on the target or open up new lines of credit in the victim's name.

What cardholder would expect an unexplained charitable donation on a credit card bill to be the handiwork of criminals? But savvy consumers may find the tell-tale signs of Internet thieves in such small, unexplained charges. A $1 donation made to a charity’s website can allow an identity thief to determine whether a credit card is still valid.

The danger to credit card data at Web merchants has become serious enough that Visa and MasterCard recently threatened to fine online businesses that fail to work towards meeting stricter security guidelines.

Visa released a report in September 2006 showing that four of the top five causes of credit card related breaches were digital security limitations at merchants of all sizes. These weaknesses included misconfigured Web servers, missing or outdated software security patches, and the use of vendor-provided default passwords and settings – all of which represent violations of new credit card industry standards.

Online merchants need to be more aware of the threat from hackers, while consumers need to be aware of what sites are taking the necessary precautions to guard their credit card information. Some of the victims that have fallen prey to hackers have been those that found the cheapest vendor possible through a bargain shopping website. Cardholders should make sure that any site they decide to shop on takes all the necessary steps to ensure the security of credit card transactions.

After all, what is the value of saving a few dollars if it comes at the cost of your credit card information?