What Causes a Credit Card Company to Flag a Card?

If you can't provide proper identification, it can raise a red flag.

If you can't provide proper identification, it can raise a red flag.

Getting your credit card declined in a restaurant or at the register can be embarrassing and frustrating. However, your card-issuer actually is taking steps to protect you against fraud, which, left unchecked, could create an even bigger financial hassle for you.

Red Flag Laws

The FTC Bureau of Consumer Protection requires creditors and financial institutions to have Red Flag Laws in place to protect consumers against fraud and identity theft. Red flags are specific types of suspicious credit activity that signal possible fraud. If any of a creditor’s predetermined scenarios come up during a credit transaction, it alerts the individual or company handling the transaction that something may be up.

Excessive Use

If you usually use your credit card for gas or groceries but suddenly go on a wild spending spree and buy high-end electronics, it's going to send up a red flag for the credit card company for unusual or excessive use. Another warning sign is when you rarely -- or never -- use your card and then begin making a lot of purchases with it. You usually can resolve the situation by confirming for the company that you're making the purchases. This typically can be done by a simple phone call and verifying some personal information.

Unusual Location

If you're traveling and using your credit card for major purchases out of the state or out of the country, it can trigger a red flag with your creditor. For example, if your card has always been used in and around Ohio and is suddenly used in Europe, it will raise a red flag. You can let your credit card company know in advance if you're traveling to help avoid triggers, but it's a security measure put in place for your protection, and you may still be required to verify who you are.

Signature, Identification or PIN

When you use a credit card you’re usually asked to show photo identification, provide a signature or enter a personal identification number. If you don’t have ID, or your ID looks forged, your card signature doesn’t match your purchase signature, or if you enter the wrong PIN more than once, it can trigger red flags. When shopping online you may be asked to provide authenticating info to use a card -- such as answering challenge questions. If you can’t provide the right answers, it could flag your account.

Reported Loss

If you report your card as being lost, the credit card company will probably deactivate and then flag the card, in case it was stolen. This prevents anyone else from using your card. The creditor should give you a time frame for when a new replacement will arrive, but in the meantime, you'll have to use cash, checks or a different card to make purchases.

 

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