Credit Card Expiration Dates: What Purpose Do They Serve & What Happens When They Occur?
Like all good things in life, credit cards must at some point come to an end. More specifically, all credit cards have expiration dates. They typically fall three years after a card is first activated, and you can use your card without interruption through the end of the listed month (e.g. 12/16 means Dec. 31, 2016).
But while credit card expiration dates actually serve a number of important functions – ranging from fraud prevention to profit driver – they have long baffled consumers. Fortunately, the following information should help clear things up in terms of what happens when expiration dates roll around as well as their perceived pointlessness.
Reasons for Expiration Dates
As mentioned above, there are indeed a few logical reasons why credit card expiration dates exist. And while they primarily serve to benefit card issuers, a credit card company’s interests aren’t always counter to ours as consumers.
- Fraud Prevention: The inclusion of expiration dates on credit cards is mandated by fraud prevention agreements between card issuers and card networks (e.g. Visa, MasterCard), as they give payment processors one additional piece of account data to cross-check and verify, thereby exponentially decreasing the ease with which criminals can use stolen credit card numbers (which are much easier to come by than expiration dates) to make unauthorized transactions online or over the phone.
- Refresh Inventory: Credit card companies regularly introduce new card designs and security features, and expiration dates give them an opportunity to get as much fresh inventory into circulation as possible.Creditors also have a monetary incentive to improve the ease with which you can use your card. The more you spend, the more issuers make in transaction costs and interest. Since it’s difficult to use a beaten up card with a damaged magnetic stripe, expiration dates allow issuers to keep their customers’ cards functional and keep revenue flowing in.
- Reengage with Consumers: Expiration dates give credit card companies a built-in excuse to get in touch with you, perhaps reminding you of an unused card that you’d forgotten about or providing the issuer with an opportunity to upsell you on other products and services. In this sense, expiration dates actually help with customer retention.
What Happens When a Credit Card Expires?
In most cases, when a credit card is nearing its expiration date the issuer will automatically issue a new card. However, some issuers reevaluate their customers’ credit as their expiration dates near, and their resulting decisions could prove to be a good or bad surprise (e.g. a higher credit line, or the decision not to extend your account).
Regardless, you likely will be notified about the future of your account the month before your current card is set to expire. In most cases, you simply will be sent a new card with an updated expiration date and CVV code, but the same account number embossed on the front. This is an indication that your account is in good standing and nothing else other than the plastic has changed. If your issuer decides to upgrade your account, the new plastic that you get in the mail will likely bear a new account number as well.
Still, it’s fair to wonder how long you’ll be able to continue making purchases with the expiring credit card, as most of us will delay updating our account information until the last moment. The card, by rule, will remain active until the last day of the month in which the expiration date falls, but don’t be surprised if it continues to work for months thereafter, particularly if it is being used for automatic monthly payments. Roughly 1.4% of all attempted credit card transactions are made with expired cards, according to the payment processing company BrainTree, and 34% of them are approved.
If you are trying to decide whether or not to keep your account open, you should check out WalletHub’s article about the pros and cons of closing credit card accounts.
Credit Cards & The Environment
Have you ever wondered about what happens to a credit card when it expires? Where does the plastic go? Is it recycled or does it become a drain on the environment? When you consider how many credit cards, prepaid cards, debit cards, ATM cards, gift cards, etc., expire each year just in the U.S. – tens of millions, according to WalletHub estimates – it’s certainly an issue worth exploring.
Between 30 and 60 million pounds of plastics are discarded annually, according to Samantha MacBride, an assistant professor in the School of Public Policy at CUNY-Baruch College and former deputy director for recycling at the New York City Department of Sanitation, yet only about 7% of it is recycled. However, “financial plastic” likely accounts for only a small share of the plastics that we as a society consume on a day-to-day basis.
“I am not aware of statistics that would estimate how much of this tonnage consists of credit and/or gift cards, but I am pretty sure that the contribution of these sources of plastic waste is very, very small in comparison to containers, bags, toys, and personal hygiene products,” MacBride told WalletHub. “So in my view the issue of credit card recycling is not really relevant, although the issue of plastics in their entirety, including recycling but more importantly plastic pollution of oceans, and health impacts of plastic consumption, is very, very important.”
Nevertheless, if you’re the type of person who would rather find new uses for things rather than throw them out, there are certain programs that repurpose old cards. MTV’s Green Picks Recycling machine, for example, is basically a vending machine that will compress a used credit card, gift card, etc., to create a guitar pick. There are likely countless other do-it-yourself uses for old “financial plastic” as well.
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