Why Credit Cards Expire

Laura Slawny • August 4, 2014

Every few years I get a series of panicked phone calls from the gym, the newspaper and online subscriptions.

The credit card on file was denied! Customer reps nervously suggest other payment options until I assure them the account is still open, but the plastic card simply expired.

To be fair, the bank always sends me a new card well in advance, but by the time the automatic charges go through, I have already forgotten about it.

So why do credit cards expire and why are there expiration dates on cards to begin with?

Most banks will tell you it’s part of the agreement they have with the network like Visa or MasterCard. An easy answer, but there is more to it than that.

1. Marketing.

Branding is everything, so sending you a new card with up-to-date colors or a new logo helps their marketing department every time you pull it out.

2. Utility.

We’ve all had the magnetic stripe fail on older cards. You swipe it two or three times without hearing those little beeps and clerk has to enter the numbers manually (usually after a long, loud sigh).

Credit card companies estimate the card’s longevity, then use the expiration date to send you a new card before the old one quits working.

After all, if your card doesn’t work, you won’t use it and the credit card company loses money.

“Credit card companies don’t

want you flashing an old card.”

3. Review/change conditions.

Credit card companies use expiration dates as a benchmark for reviewing customers accounts.

The company may review your buying habits and adjust your credit line, or they can simply use it as an excuse to call you and remind you of their services. They can also decide to end the specific program tied to the card and switch you to something else.

While they do have to send you the new terms and conditions, it’s up to you to figure out what’s changed.

4. Prevent fraud.

The best reason for having an expiration date is to protect the consumer from fraud.

When you swipe a card, it sends information through a security system to validate the card’s legitimacy based on several factors including the expiration date.

Apparently thieves are good at stealing numbers, but not expiration dates, and this trips them up.

It’s the same reason gas stations ask for your zip code and online sellers want your CVC security code. It’s just another layer of protection that is worth the minor inconvenience.

Your responsibilities:

If your credit card expires and you haven’t gotten a new one, it could be a sign of fraud. Call the issuer immediately.

Either the bank forgot to send you an updated card or a thief intercepted the mail to get your new card. Protecting yourself will save you a lot of headaches.

When you get your new card in the mail, call the 800 number so they know you received it. Otherwise, they could assume it was lost and cancel it.

Be sure to read the terms and conditions carefully. It’s long and boring and uses really small font – but banks change the terms of your contract at this time.

According to the federal CARD Act, banks can adjust your credit line but cannot change certain fees or interest rates without a 45-day notice.

One more suggestion: Use the new card as a reminder to review all your automatic payments. You may find forgotten accounts or save $20 a month by canceling that online account you keep forgetting.

Photo source: yems.info.

Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

About the Author

Laura Slawny

Laura Slawny is an award-winning executive news producer with more than 15 years experience writing about issues that impact families all over America. Since 2012, her focus on personal finance has helped consumers in the U.S., Canada and Australia. Laura believes complex financial concepts should be easy for everyone to understand. Her work appears on multiple consumer websites, both as an author and ghost writer. She also enjoys writing about leadership and healthy living. Connect with Laura on Google+.