No More Signatures

Borrowing, Credit Cards

Why do you even bother signing your credit card receipts? Nobody ever looks at it. You could write your name, Donald J. Trump, Samuel L. Jackson, or Bullwinkle J. Moose and nobody would care – would they?

Theoretically, your signature does matter. That signature indicates a binding contract for the purchase. A seller could choose to void the transaction given a false name. If the charge is challenged later, you have given away a valuable piece of potential evidence.

Credit card signatures were originally intended to give the seller a method of verifying identification by checking the signature on the receipt against the credit card signature. Harried checkout clerks have rarely taken this seriously. They process transactions as long as there is any type of scribble on the receipt.

For this and many other reasons, the credit card signature is on its way out – thanks to EMV cards. You probably know them as “chip cards”.

EMV (for Europay, MasterCard, and Visa) cards contain embedded chips that transmit a unique transaction code for each purchase when they are placed in a card reader. Traditional magnetic stripe cards have one set of information embedded on the stripe.

A thief who steals information from a swipe of a magnetic card can use that information for other, fraudulent purchases – but stealing EMV information is useless since the code only applies to a single transaction.

EMV cards transmit data that verifies the card is legitimate, but not that the person using it is the card owner. That’s why EMV cards still required signatures, unless they are “chip and PIN” cards that require entering a PIN to complete the transaction – but if nobody checks the signature, what’s the point?

The credit card companies (Visa, MasterCard, Discover, and American Express) agree. All four have agreed to phase out signatures. Visa, the last holdout, agreed to make signatures optional as of April 2018.

How does this affect you? In practical terms, it doesn’t. However, you should realize that a chip card without a PIN doesn’t offer extra security if somebody steals your card. You still must cancel/freeze your account and deal with your card issuer regarding any fraudulent transactions.

Even when all cards are EMV-compliant, the credit card signature will die out slowly. Transactions with older, non-chip cards will require signatures, as will transactions where the EMV reader fails and the magnetic swipe is needed.

In addition, some merchants are slow to adopt the necessary technology. Approximately 52% of merchants are currently capable of handling EMV cards.

Recent liability changes shifted the burden on fraudulent charges from card companies to merchants. Since 2015, if a merchant accepts a fraudulent point-of-sale transaction on an EMV card because their reader still requires a magnetic swipe, the merchant retains liability because they didn’t take proper security measures. (Pay-at-the-pump gas station card readers are currently exempt – they have until October 1, 2020 to convert to chip readers.)

Merchants could wait and convert when EMV card adoption reaches economic critical mass, or they may continue with magnetic swipes and write off the occasional fraudulent charge as a risk of doing business. Either way, other forms of security will eventually replace credit card signatures entirely.

Despite the no-signature announcement from the credit card companies, you’ll still have a few opportunities to sign your credit card receipt under whatever name you choose. We suggest that you stick with your own. Otherwise, we wish you luck explaining to the big box store why Bullwinkle J. Moose purchased a defective 65″ TV using your credit card.

If you want more credit, check out our list of credit card offers.

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