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In an era of rampant breaches of credit card numbers, it can seem like it's just a matter of time before you, too, will fall victim.
More than half of U.S. consumers, or 53%, say their financial institution sent them a new payment card over the previous year because of a data breach or fraud, according to a 2016 report by Aite Group, a financial services research firm.
But you can use a simple "autopay and everyday" strategy to reduce the hassle that arises after a card theft. Choose one card to make automatic payments on recurring bills and another for everyday spending.
How it works
Consumers rarely are liable for fraudulent charges on their credit card accounts. A card issuer typically cancels the old number and issues a new card with little fuss. But if the stolen card is linked to automatic billing accounts, it’s a hassle to switch them to the new credit card number.
Some merchants subscribe to auto-updater services to get consumers’ new card numbers, but many don’t. For consumers, changing card numbers could mean logging into dozens of websites or apps to update information so the vendor doesn’t halt service or charge a late-payment fee. Temporarily losing access to a streaming music service is no big deal, but missing payments for auto insurance or mail-order prescriptions can be painful.
The autopay and everyday tactic is meant to help you limit that hassle:
Designate one of your credit cards for trusted recurring autopay accounts, such as cell phone and utility bills, software subscriptions and news sites. Then don’t use it for anything else. That way, this card isn’t being processed by restaurant servers, gas station pump readers or online retailers — common ways thieves steal numbers.
Use one of your other credit cards for everyday spending, both in stores and online
Paul Stephens, the director of policy and advocacy at the Privacy Rights Clearinghouse, who likes the autopay and everyday idea, says it’s also an efficient way to track spending on automatically paid bills.
Eva Velasquez, CEO of the Identity Theft Resource Center, says the simplicity of the two-card system is key. “Any time you’re giving people easy, actionable strategies — small things they can do to reduce their exposure — we are fully supportive of that,” she says.
The technique won’t help to prevent fraud on your everyday spending card. But if that happens, at least you won’t endure the headache of updating autopay accounts.
“It’s not a panacea,” Velasquez said of reserving one card for autopay bills. “An entity can still have a breach, so it’s still possible that card could be compromised. But it’s limiting the footprint of that card.”
Which cards to use
A flat-rate rewards card or an old card that you want to keep active would be ideal to use for autopay accounts.
Flat-rate rewards cards. Using a rewards card to accumulate cash-back rewards, points or miles makes sense for bills. You have to pay them anyway, so you might as well get something for it. With cash-back cards, the rewards will be like a discount on your spending, assuming you pay your monthly credit card bill in full and don’t incur finance charges. A flat-rate card is ideal because its rewards rate is the same regardless of the merchant. You can get a decent cash-back rate without having to juggle multiple cards or increasing your exposure to potential fraud.
Old, unused card. If you’re being strategic about keeping your credit scores high, you’ll want to keep old credit card accounts open, even if you don’t like a card anymore, unless it charges an annual fee. The age of credit accounts is a major factor in the calculation of credit scores, as is your total credit line compared with the total amount of credit you’re using. If you use the unwanted card for automatic payments, the credit account stays active and won’t be closed by the issuer.
The autopay and everyday strategy is just one way to limit the downsides of credit card fraud. “Practicing good identity hygiene is about layers of small, actionable steps you can do to reduce your exposure,” Velasquez said.