A Two Card Strategy

Today I discovered that I was the victim of an instance of credit-card fraud. I disputed the charge. The purchase was labeled as “card present” at a store I’ve never been to. My card was never present at that store.

The same thing happened to me once before with a card issued by Citi. When they concluded their investigation they falsely claimed that the charge was legitimate, and demanded that I pay it. As in today’s case, the charge was made in a store that I and my card never visited, and labeled “card present”. Their faulty conclusion cost me hundreds of dollars. I no longer give Citi my business. They appropriated enough of my money through their false claims to deserve my business.

Today’s instance of fraud looks similar. I will not be surprised if another false claim of legitimacy comes out of the “investigation” into the charge. And if it does, a second bank will lose my business.

But enough about banks confiscating money from their customers based on false claims of charge legitimacy! I did learn an important lesson from today’s events. This card had a mix of subscription and ad-hoc charges on it. I should have been following a two-card strategy to separate the two.

Ad-hoc charges require exposing the card to unknown point-of-sale equipment. That’s a much higher risk payment than one arranged over the wire directly with the vendor and then charged directly to the card electronically, all most likely run through a tokenizing processing vendor. Separating the ad-hoc from recurring purchases divids the high from the low risk charges.

The ad-hoc charges are more likely to be compromised. But they are not difficult to change. You simply use a different card. The recurring charges, in contrast, are extremely painful to change. You need to update payment methods, make sure there is continuity of payments, make sure that no scheduled payments hit the old card if it has been disabled, etc. And that’s what I had to do today.

So from now on I will follow a two-card strategy, and split the two types of charges. I’m surprised I never heard this suggested before. It was a painful lesson, but useful.