A few months ago, I’d just taken my brand-new travel rewards card out of its envelope. Eager to make a dent in the spending requirement for the sign-up bonus, and to get double rewards on travel, I made my first purchase – nearly $1,600 worth of tickets on Singapore Airlines.
After entering my card details and clicking “purchase,” I received a message saying my card had been declined. I had to call my bank and confirm my identity before I got my tickets.
A similar thing might have happened to you – either while shopping online or, worse, at the checkout counter. Here’s why your card might be declined – and how to minimize the chances of getting shut down.
Why was my card rejected?
Your credit card may have been rejected because you’ve maxed it out or gone delinquent. If neither is the case, it’s could just be your bank looking out for you. In its efforts to continuously watch for fraud on your accounts, it might block legitimate purchases.
That may be inconvenient, but it turns out many consumers don’t get too upset about false alarms. A June 2014 survey from CreditCards.com asked consumers how they’d feel if a legitimate purchase were blocked because of suspected fraud – 28 said they’d feel “unbothered,” 25 percent said they’d be “annoyed,” 22 percent responded they’d be “relieved,” 9 percent said they’d be “embarrassed,” and just 8 percent said they’d feel “angry.”
Besides, a false alarm is better than fraud escaping notice.
“It’s all a balance between convenience and security, both for the benefit of the bank and the benefit of the customer,” says Doug Johnson, vice president of risk management policy at the American Bankers Association. “The bank is always looking at whether it has enough information to potentially inconvenience a customer because a transaction may not be normal for them. But frankly, the greatest inconvenience for a customer is when they’re inconvenienced by fraud on their account.”
If a bank suspects fraud, your card won’t necessarily be shut down completely, and you might be able to use it for other purchases. In some cases, a suspicious purchase (fraudulent or legitimate) may even be allowed to go through, and the bank will call you later to check on it. In either scenario, if the purchases turn out to be fraudulent, you can then discuss replacing your card.
What trips the wire?
That depends on the cardholder.
“What the bank is doing is continually evaluating transaction behavior,” Johnson says. “It’s essentially building the case for whether a transaction has higher levels of risk than a transaction the customer is normally doing.”
While you may have heard a lot of stories about purchases getting blocked abroad, foreign travel won’t always raise a red flag with your bank.
“They would never, for instance, flag travel for me,” Johnson says, adding jokingly, “It would be more likely that they’d say, ‘You’ve been home for three days. This is suspicious.’ It’s all very specific to the transaction behavior associated with the customer.”
That might help explain why my plane ticket purchase was blocked. The bank barely knew me, and there I was, buying tickets on a foreign airline.
“For some reason, thieves like to buy travel with other peoples’ cards,” Johnson says.
So should you be worried that, if you use your credit card all over the world for a variety of purchases, your issuer won’t even notice fraud? Johnson points out that banks’ algorithms are incredibly sophisticated, and often surprisingly so. For example, his bank once flagged some purchases of jewelry and motorcycle parts on one of his very active cards.
“I was sad to some degree because it was suggesting I wasn’t manly enough to buy motorcycle parts or that I wouldn’t give jewelry to my significant other,” he says. “It’s very interesting how sophisticated the analytics behind these things can be.”
How to prevent card shut-downs
You can’t predict what your issuer’s fraud algorithm will flag, but there are a few simple measures to take to lessen the chance a purchase gets rejected.
- Tell the bank about your travel plans. Call in advance and tell the bank if you’re going abroad – or across the country. The point is to give your bank a heads up that “a purchase could be happening in a geographic location your cad is generally not used,” Johnson says. “And that could be in the United States, too, not just international travel.” Your bank will add your travel dates and destinations to your file.
- Consider giving your bank a heads up about a major purchase. It can’t hurt to let your bank know if you’re making a major purchase — like expensive jewelry or electronics — with your card.
- Make travel purchases from home. If you’re buying train tickets for half way across the world, try to buy them from a home computer, so that a strange IP address doesn’t spook your bank.
A new twist
Visa’s trying a new method of blocking fraudulent purchases (or at least making things more inconvenient for card-cloners), and you may experience it at the gas pump.
Visa Transaction Advisor (VTA) allows each gas station owner to choose a risk threshold (on a scale from 01 to 99). When someone swipes a card at the pump, Visa runs a less-than-1-millisecond analysis of hundreds elements to determine the risk score. If it falls over the station’s chosen comfort zone, the display screen tells the cardholder to see the attendant inside. Legitimate consumers will likely do so. Fraudsters, who are likely trying to test out a counterfeit card at an unattended pump, will probably flee, says Mark Nelsen, vice president of risk products and business intelligence for Visa.
“We’ve had this out in the market for six months,” Nelsen says. “We’ve been analyzing those consumers who were triggered for high risk, and it does appear that the criminals are leaving. Genuine consumers are likely to go inside.”
Flagged transactions result in a notification to the merchant as well as the issuing bank, so it can confirm the transaction with the cardholder.
VTA went through a pilot test at 300 stations in January and February 2014 and has now rolled out at 25,000 stations. Don’t expect to get sent inside to complete many of your fuel purchases, though.
“In terms of overall population, less than one-tenth of 1 percent of transactions would actually ever hit the risk threshold,” Nelsen says. “So it’s a very small portion of the highest-risk transactions that would get trigged for that high risk alert.”
So what triggers that alert? There are 500 elements factored into the risk score, culled from fraud activity reports from around the world and assembled to create “a profile of fraud and what it looks like,” Nelsen says. Location could be a factor, as could purchase amount and whether the card was involved in a data compromise. If a station is in an area plagued by fraud, it can set the risk threshold lower, thus possibly catching more transactions in the net.
Gas stations were a logical place to start with VTA, Nelsen says, because they’re unattended and more expensive to upgrade to EMV. But Nelsen says Visa is looking for new environments.
“E-commerce is one environment, as well as kiosks,” he says. “There are kiosks now that are selling some really expensive items.”