Phasing Out Credit Card Signatures - Republic Wealth Advisors

Phasing out Credit Card Signatures

Signatures for credit card charges are going the way of the pay phone and airplane ticket.

There may be occasional uses, such as leaving a tip at a restaurant, and discretion ultimately lies with the merchant. However, now that chip- and app-enabled payments have become the norm here in the U.S., the major credit card companies – Visa, MasterCard, American Express and Discover – are eliminating the signature requirement on receipts or touchscreens.

The payments landscape has evolved so they eliminated the signature requirement for merchants, explained an American Express executive in a press release. He expressed their belief that signatures are no longer necessary to fight fraud. The reality, however, is that they were a notoriously bad fraud deterrent.

The signature myth

Most people assumed that signing a receipt approved or legitimized a charge, thereby offering a semblance of security. However, stores and restaurants rarely looked to see if the signature matched the name on the card, much less whether it matched the signature on the back.

Eventually, several companies stopped requiring signatures for smaller purchases. They felt it was not practical to store and be able to produce receipts for each latte or small grocery purchase. In 2012, MasterCard and Visa agreed and eliminated the requirement for totals under $50 in most industries.

Now, with the signature requirement being eliminated for larger purchases, the signature is becoming a relic reserved for special uses. President Trump may sign Executive Orders with a flourish to rival John Hancock, but most people no longer sign anything. Bills are paid online, credit and insurance applications usually do not require it, and now credit card transactions will be mostly electronic.

New advancements and technologies

Traditional credit and debit cards had magnetic strips that stored unchanging cardholder data that enabled transactions. But, the magnetic strips were easy for counterfeiters to replicate.

The mounting problem of credit and debit card fraud, and advances in digital technology, led to the development of high-tech tools to authorize purchases securely. These range from the silver chips on major credit cards to Apple Pay and its contactless competitors, and biometric options like iris scanning on the Galaxy S8 and facial recognition on the iPhone X. They all make it more difficult for fraudsters.

Effects of the changes

When the chip-enabled cards utilizing EMV technology (a nod to European security efforts of MasterCard and Visa) were introduced in the U.S., checkout times increased in many places as people got used to the dipping versus scanning their cards. Eliminating the signature requirement is expected to speed things up.

For consumers, merchants and banks, the introduction of chip-enabled cards has had a tremendously positive effect overall, and fraud has measurably declined as reported by the major credit card issuers. The reductions in fraud costs for banks and merchants will help keep overall costs down. Consumers also benefit from the drop in fraudulent transactions and the inconvenience associated with contesting charges they didn’t make or getting new credit cards with new account numbers.

For those of you who scratch something illegible on a credit card receipt, relief is likely fast approaching. Don’t be surprised if your signature is no longer required when you make purchases later this year.






IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.