Wither Disposable Credit Card Numbers

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Have you ever heard of disposable credit card numbers?  The idea is that a single number is generated for cardholders to use for a one time transaction. The theory is that once the number is used to process a single transaction, it becomes invalid. In this way, customers are protected from data breaches by the merchants.

What Is Right And Wrong With This Theory

I have never used a disposable credit card number, but I have spent some time considering them. First, the claimed threat of a security breach is hardly a concern. So long as card holders report any fraudulent charges, they are immediately removed from their account. In effect the only one’s at risk of fraud are the banks, not their customers. The worst part of this kind of fraud is the hassle, which involves contacting your bank and possibly having a new card issued.

What consumers are more legitimately concerned about is the prospect that an merchant will slip something into an agreement that can allow them to charge your card repeatedly. They are not supposed to be able to do this without your authorization, but some companies have become experts in manufacturing such authorization out of microscopic fragments of small type. Worse, many have been able to convince banks to uphold these charges in the event the cardholder pushes back and issues a chargeback. In these cases, I can see the real need for a one-time use credit card number. For example, Paypal comes to mind as a company that nobody seems to trust. When a transaction goes bad, Paypal likes to ding people’s credit card accounts. Rental car agencies, with their propensity for finding hidden damage months after a car has been returned, would also be excellent candidates. Unfortunately they require you to present your card when you rent, even on a prepaid reservation. Remember, these disposable cards are only usable for online and telephone transactions, not face to face situations when you have to present your card.

Of course, there were problems with this strategy. There were reports that charges sometimes went though over the maximum limit for a number or beyond the expiration date. Other times, people used them for online transactions where they were later asked to show the card, such as airline or movie tickets. All in all, it sounds like banks had some headaches with this system.

Disposable Numbers Are Dying

American Express was the first issuer to announce this system back in 2000, but they have since discontinued it. Discover has also announced just recently that they will end this program as well, presumably do to the high cost of numbers or something. That leaves Bank of America and Citi as the remaining providers of this service.

Even though I don’t use it, I think that it is too bad. This is an innovative feature that has some distinct uses. I know of lots of shady merchants who I would like to avoid the possibility having to fight them over a charge I didn’t authorize. There is a lot of innovation left in the credit card business, but no there is just one less feature on some cards.

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