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Why Do Credit Cards Expire?

Author: Andrew Smith

On the list of questions you may never have thought to ask, is this question: Why does a credit card have an expiration date? There are a few reasons why.

Fraud Protection

Even before the days of data breaches and EMV cards, there was credit card fraud. Thieves would get their hands on your card number and go on a shopping spree. Credit card companies came up with a low-tech way to help make stealing your card more difficult: adding a second number, the expiration date.

Eventually, that proved to be not quite enough: Fraudsters could get both numbers from the receipt you got for paying with a card. Later, a third, three- or four-digit security number was added, which was printed on the front or back of the actual card and never appeared on the receipt. All the same, changing the expiration date makes it more difficult for thieves to validate and use your card.

Eligibility Check

Just because you qualified three years ago doesn't mean you qualify now. If the card has an expiration date, it gives the card issuer an opportunity to reevaluate your eligibility (and terms). Don't expect a credit check unless the issuer asks, but an approaching expiration date is a time when paying your bills promptly each month works in your favor.

Physical Condition of the Card

Do you have a card in your wallet that's looking a little shopworn? How about one that you have to swipe multiple times before it works? If you use your cards often, they will wear out and the last thing the card issuer wants is for you to have a non-functioning card. The expiration assures that you get a shiny, new card before it wears out.

Branding

Along with making sure your card is working, the issuer may want to update the look of the card. No company wants its branding from yesteryear on the card forever. The expiration date helps to guard against a having a card that looks like you (or your dad) once used it to rent a movie from Blockbuster – on a VHS Tape.

Reminder That You Have It

Maybe you've sworn off that particular credit card. You cut it up or stuffed it in the back of your dresser in case you absolutely needed it. That was two years ago and you've all but forgotten it was there. Credit card issuers are no strangers to human behavior. They know that putting a shiny, new card in front of you may entice you make a few binge purchases you wouldn't have otherwise.

(Hint: If you swore off using your credit cards, don't rush to go shopping now.)

The Bottom Line

Card issuers have a method to their madness. First and most important, they want to cut down on fraud as much as possible. After that, it's about getting you to spend as much money as they can. They know that if you charge up the card, you're not likely to pay it off without paying at least a little interest.

Don't fall for it. There's nothing wrong with credit cards if you're the type of person who can pay the full balance each month. If you're not, it's best to keep the cards in the dresser most of the time.

Don't cancel them, however: Giving up a card will raise your credit utilization ratio because you will instantly have access to a lower amount of credit. And if you've had a card a long time and have been responsible, you will lose part of your good credit history. If you don't want to use the card, put it away except for necessary purchases that you pay off promptly. For more information, see What Happens When Your Credit Card Expires and How Your Credit Card Can Improve Your Credit Score.

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