Why Do Credit Cards Require A Signature?

Why Do Credit Cards Require A Signature?

March 31, 2016         Written By Jason Steele

Have you ever wondered why you are constantly asked to sign receipts when making purchases with a credit card? Credit cards have worked this way for so long, many people have simply accepted this and haven’t given it any thought. And while a signature is not required for all transactions, it’s still done often enough.

What’s the point?

There are two reasons why you still may be asked to sign a credit card receipt. The first reason is to verify your identity. Credit card users are required to sign the back of their credit card, and merchants are supposed to compare the signature on the receipt to the one on the back of the card. However, this close scrutiny rarely occurs in practice at most retailers. The second reason is to prove a transaction occurred in the event of a dispute. For example, when a cardholder claims that a transaction is fraudulent, the receipt can be used to determine if he or she actually signed it.

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When a signature is not required

Increasingly, credit card users are no longer being asked to sign for merchandise. For example, it’s impossible to sign a receipt for credit card purchases made over the phone, by mail, or through the Internet. These types of transactions are referred to as “card not present” transactions, so there is no way that a signature can be verified.

In addition, MasterCard no longer requires signatures for many transactions under $50. With Visa, signatures are not required for purchases under $50 at grocery stores and discount stores, and under $25 at many other kinds of merchants. However, you still may be asked to sign a receipt for a transaction of any size, depending on the policies of the merchant and its credit card processor.

Finally, there is a new generation of smartphone-enabled wireless payment systems that do not require a signature. These systems, such as Apply Pay, allow shoppers to authenticate their purchase with a PIN, a fingerprint, or some other type of app. As technology continues to progress, it is possible that merchants might employ other ways of authenticating transactions including terminals that use the chip and PIN protocol, and other forms of biometric authentication.

Being asked to show ID

Another way merchants are attempting to reduce fraud is by asking customers to show a photo ID. Unfortunately, many customers may not wish to comply, and the credit card networks don’t actually permit merchants to deny transactions to those who refuse to offer a photo ID.

However, merchants are permitted to request a photo ID, and in practice, some merchants may refuse sale to customers who do not comply.  Conversely, some credit card users actually choose to write “Show ID” on the back of their credit cards. While this may seem to be a clever way to combat potential credit card thieves, it turns out not to be effective or even permitted.

Merchants are not allowed to accept a credit card unless it has been signed on the back. In fact, merchants are specifically instructed to decline charges when the credit card has “show ID” on the back of it instead of a signature. Furthermore, many credit cards are printed with the instructions “not valid unless signed,” further reinforcing this requirement. Rather than attempt to fight this requirement, cardholders should simply accept it as a condition of credit card use and sign the back of their card.

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Legal protections for credit card use

Thankfully, credit cards are among the most secure possible methods of transaction. Credit card users are protected by federal law against being responsible for the cost of fraudulent transactions. In particular, the Fair Credit Billing Act of 1974 requires that card issuers hold customers liable for no more than $50 in the event of a fraudulent transaction. Yet in practice, practically all credit card issuers choose to waive this requirement by offering customers a zero liability policy.

Credit card users should always closely scrutinize their statements to look for unauthorized transactions. In most cases, fraudulent transactions are the result of card not present transactions made over the phone or through the Internet. However, in the event your card is stolen and used to make a fraudulent transaction, the card issuer may actually ask the merchant for a copy of the receipt in order to compare its signature to yours.

In addition, the legal protections for credit card users go far beyond purely fraudulent transactions. For example, credit card users can dispute a charge in the event that they don’t receive the goods or services they paid for. Furthermore, the Fair Credit Billing Act also covers goods not received as described. For example, if you ordered a medium-sized red sweater and received a large blue one, you could file a dispute that you did not receive what you paid for.

Once you understand how credit cards work to offer secure transactions, you will realize that signing a receipt is a small price to pay for this protection.

The information contained within this article was accurate as of March 31, 2016. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Jason Steele

Jason Steele is a journalist that covers credit cards, travel and consumer credit. As one of the nation's leading experts in credit cards, Jason has contributed to dozens of travel and personal finance outlets including NerdWallet, Credit Karma and the Points Guy, where he serves as the Senior Points and Miles Contributor. Jason has also been widely quoted in mainstream media in outlets such as the Washington Post, the USA Today and Bloomberg Business Week. Jason is also the founder and producer of CardCon, which is the annual Conference for Credit and Credit Card Media.
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