Finances & Money

Beware of the Closed Credit Card Account!

Normally, I’m in the habit of just tossing the credit card terms & conditions in the recycling pile, but this time, I decided to read the letter that my Discover Business Card sent to me regarding changes to the account. One particular paragraph caught my attention, and it’s something you should really pay attention to as well:

Automatic Billing:

We are adding a provision stating that if your Account number and/or Card expiration date changes and our records indicate you have automatic billing established with a merchant, we will attempt to provide your new Account information to that merchant. To ensure uninterrupted billing, we recommend you verify the merchant has your new Account information on file. You must contact the merchant directly if you do not want to continue automatic billing.

All I can say is WOW. They’re basically saying that if they issue a new card number or it expires, they’ll give out the new number to any merchant who is automatically billing my account. It might sound like a nice feature to you, but this adds a level of complexity when fighting fraudulent charges.

How many of you have gotten repeated fraudulent charges on your card which forced you to request a new card number? I have. Twice. And in those instances there’s no way to “contact the merchant directly” to cancel the billing because it’s a fraud. But now the credit card company has decided to add the feature to notify these merchants of your new number so they can keep charging you. And I can assure you the credit card company doesn’t have flags in their system to catch the bad guys before they can bill your card. Just look through the Consumerist archives for dozens of examples.

And I don’t think this is just a “feature” with Discover. I’m sure all of the major card companies are adding or have already added this feature to their terms & conditions. So use this as a reason to read over your card’s T&C to find out how they’ll protect, or not protect, you as a consumer and card holder.

With that, though, I’ll still keep using credit cards because they’re convenient and safer that debit cards or carrying cash. But now I have one more reason to be vigilant.

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Clever Dude


  • Unfortunately, Discover was already doing that, they’ve only just added it to their terms. I’ve had them let a merchant with expired numbers put through automatic payments in the past. Luckily it was someone I had authorized and not a fraud payment!

  • Yeah, all the credit card companies do that. It protects the merchant and gives credit cards a level of safety for the merchant that checks don’t have. Notice how leery places are with accepting checks but they will take a credit card without even checking ID. If you enter into a contract with a merchant, like a gym, to pay for one year the credit card company can’t intervene in that. You can’t just cancel your card to get out of the contract.

    It does make a sticky mess if the charge is fraudulent though.

  • I’ve known about this policy for a while, but I’ve never been concerned about it. Why? Well because in the event that you have to report a card missing or that fraudulent charges have been placed on your account, when you contact the card company they are usually very good about placing a hold/block/flag on particular merchants. And I don’t think this policy applies to cards that have been reported stolen and been re-issued. I know credit cards in and of themselves are evil,.. but not all credit card companies are.

  • I forgot to add that I think this applies mostly to cards that have been re-issued due to impending expiration.

    But if you are concerned, call your credit card company. They’ll set you straight.

  • Yea, I was about to say the same as Rob. Basically to add-on. If you’re not happy, call them, if they don’t change what you want them to, ditch them. There are plenty of places out there willing to take on your debt these days. 🙂

  • “Just another sneaky way for the credit card companies to stick it to their “best customers.”

    Why is it snicky? It is actually pretty convenient if you have an ongoing relationship with a merchant or use your credit card to pay some bills. You don’t want your bills to bounce or remember to update merchant information every time. It isn’t the issue when you close card, only when your old one expires. If you terminated the relationship with a merchant and they are still charging you, take it up with the merchant, or/and call the CC to put stop payment. Works fine.

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