Gephardt: How A Little-Known Feature Can Keep Credit Card Fraud Going
SALT LAKE CITY, Utah – Whenever we see suspicious activity on our credit or debit cards, the general operating procedure is to have the bank reverse the charge and issue us a new card number.
However, there’s a little-known feature many credit card companies offer merchants that might keep that fraud going, even on our new cards.
That is what happened to Grant Larimer. When he spotted a new gym membership fee in his credit card transactions, he knew it was bogus right away.
It was for a Los Angeles area Planet Fitness gym he said he never visited.
“I called up the bank and they reversed the transaction, canceled my card and got me a new card,” said Larimer.
Then, it happened again.
“A couple of weeks after I got a new card, another Planet Fitness charge came through on my new card number,” he said. “And, I’m like, ‘Well, how did they get my new card number?’”
Larimer got a third card, but it happened yet again.
Three different cards, three different bogus gym charges.
How did it keep happening?
Turns out, Latimer’s card company – without telling him – was sending his new card number directly to Planet Fitness. It’s a service many major credit card companies provide merchants called ‘account updating.’
“Yeah, account updating services can throw people off and can seem a little intrusive for folks,” said Matt Schulz, a chief credit analyst for LendingTree.com.
People get new credit card numbers all the time.
Subscription-based businesses from gyms to streaming services will use an account updater service to make sure they don’t lose those customers who get a new card number or their card expires.
“What this service does, is it allows that card to be updated automatically without you having to take the time to go in and do it,” explained Schulz. “It can end up causing a strange situation where you think you’re not going to get billed anymore. But, when that card gets updated you might get billed again.”
Convenient, sure. As Larimer discovered, if a thief uses your card to buy a subscription service or something with a recurring payment, their fraud can keep going in spite of new card numbers.
This time, we reached out to Capital One on Larimer’s behalf and a spokesperson assured us the problem has been fixed. They will no longer give his credit card number directly to Planet Fitness.
In an email, Capital One told us: “All consumers should be vigilant when it comes to protecting themselves from fraud, including monitoring their monthly billing statements and immediately contacting their bank if they notice something suspicious. In cases where someone has fraudulently established a recurring payment or subscription, we strongly encourage consumers to contact both their bank and the merchant directly, to ensure charges don’t continue once a new credit card has been issued. As always, Capital One customers have zero liability for any fraudulent charges.”
For its part, Planet Fitness said it has shut down the fraudulent accounts tied to Larimer’s info.
“So, what this is, is another good reason why it is really important for people to check their online bank or credit card statements for unusual activity,” said Schulz. “And that way, you can figure out what’s going on and take care of the problem.”
Larimer said he is glad this hassle is behind him but frustrated that a policy of handing over his credit card number to a company without his permission exists.
“It threatens our finances, privacy, things like that,” he said.
One reason a lot of cardholders may not be aware of account updater services is because it’s buried in the card’s terms and conditions. If you want to opt out, you have to do it through your bank.