Emerging technology gives consumers the ability to turn their credit and debit cards on and off through a smartphone app, a capability that can not only help families and businesses control how authorized users shop with the card but also, and perhaps more importantly, help prevent card fraud.
One of the companies developing this tool is Ondot Systems, which works with payment processors to make the technology available to banks and their customers. The on-off function, in addition to other control preferences, is available to cardholders through their bank or credit union's mobile app. Some financial services companies are working to develop their own technologies as well.
A remote control for your credit card
"The basic idea is very simple," said Rachna Ahlawat, founder and executive vice president of products at Ondot Systems. "Almost everybody has a credit or debit card in their wallet, and most everybody has a smartphone, so what we essentially created is a remote control for the cards they already have in their wallet."
With CardControl, the primary account holder has a suite of preferences at his or her fingertips, Ahlawat explained. There's the simple on-off switch, which prevents any transaction when a card is turned off, whether it's in a brick-and-mortar store or a card-not-present transaction, such as a phone or Internet order. If someone attempts to use the card when it's off, the cardholder receives an alert -- if he was trying to use it but forgot to turn the card on, the cardholder can just flip the switch on his smartphone. Otherwise, the cardholder has just been alerted to attempted unauthorized use of his card.
CardControl goes even further (if you want it to): You can set location preferences, so the card doesn't work outside certain areas, as well as merchant categories. This feature comes in handy for cardholders with authorized users on their accounts, Ahlawat said.
"My daughter, her card is open for use at gas stations around the San Francisco Bay area and for department stores," she said. Her daughter is an authorized user on her card, and her daughter can also set preferences of her own (within the parameters set by the primary account holder). Because you can also set spending limits, parents can prevent their kids from abusing authorized user privileges.
These features can benefit company accounts, as well. Not only does this help the card administrator better control use of company cards, it can reduce company risk exposure, since business cards don't have the same fraud liability protections as consumer credit cards.
Prevent fraud with current technology
Ondot Systems works with payment processors -- they're essentially the middlemen between merchants and banks, and consumers don't interact with them -- and these authorization entities work with banks to incorporate the technology into their consumer offerings. CardControl is currently available through about 10,000 U.S. financial institutions, Ahlawat said.
Even if your bank or credit union doesn't offer such technology, it likely gives you the option to set up transactional monitoring, which can help you spot unauthorized activity. You can set up alerts for transactions greater than a certain dollar amount, and because mobile applications are widely available for financial institutions, you can easily check your card activity daily.
Consumers should prioritize such account monitoring because credit and debit card fraud can seriously damage your finances, even if it's just for a short time. Debit card fraud can be particularly troubling, because you may need the money stolen from your account for bills, and no matter how quickly you spot the issue, the missing money could cause you to miss a payment or overdraft your account.
The credit damage you sustain from fraud could put you in a serious bind if you're applying for financing, setting up utilities, looking for a job or apartment hunting. Depending on the extent of the fraud, it can take months to get back to normal, so take the time to review your card activity regularly, request your free annual credit reports and check your credit scores for signs of anything suspicious. You can see two of your credit scores every month for free on Credit.com.