Single Payee Credit Cards for Recurring Payments
Date Published: 24 June 2011
Have you ever set up a recurring payment with a vendor using a credit card? I have. It’s very convenient, both for the consumer and the vendor, because neither one needs to be bothered with invoicing and paying bills on a regular basis. Everything’s great, as long as the consumer really does still want the product or service offered by the vendor, and as long as the vendor is ethical and diligent about allowing the customer to cancel their service. It’s this last bit where things sometimes break down, and which is why a large number of people choose not to use any kind of automated billpay, whether through their bank or by sharing credit card details. If the consumer tries to cancel the service, but the vendor continues billing, things can get ugly. The consumer can contest the charges with their credit card company, and this can often result in the charges being reversed and the vendor being hit with fees from the credit card company, often resulting in them becoming much more responsive and actually cancelling the service/ceasing further charges. But contesting charges is a pain, and sometimes the vendor doesn’t get the message, and you have to do it more than once. If all else fails, the consumer can take the “nuclear” option of cancelling the card in question, which (in theory, but sometimes believe it or not even this may not work) then stops the vendor from being able to charge that account in the future. But it’s a major hassle for the consumer, and it also nukes any other recurring billing vendors that were using that same card.
My solution to this would be to allow consumers to set up single-payee credit cards easily through the credit card company or bank’s web site. Someone, somewhere, may already provide this service or feature, but I’ve never heard of it. I came up with the idea today because currently I’m fighting with an internet service provider whose services we cancelled in early May (almost 2 months ago) but who has not yet stopped billing us. When called, they said “cancelling the account takes time, and we’re still processing the cancellation request, so in the meantime we’re still billing you.” WTF? No freaking way. So, while this is an ongoing issue, and one possible solution in the short term is the nuclear one listed above, what I would like to have had is a service like this.
Single Payee Credit Cards
A single payee credit card is a card that, when created, has a designated payee. It will reject any transaction from a payee other than the one it was created for. Since it has such a limitation, it’s probably not worth carrying around with you, so it would be reasonable for these to be completely virtual, with access limited to the website on which the card is created and managed. Since there is no physical card, there’s also no risk that it will be lost or stolen, although certainly electronic security measures will still be important. Another key feature of this kind of card is that it can be cancelled via the web site without the need to call the credit card company or otherwise jump through hoops. There are two reasons why you as a consumer would want to set up a single payee credit card:
1. Semi-Trusted Online Vendors
Sometimes you find something you want to buy online, but it’s from a site you’ve never heard of before, so you’re not sure you should really be giving them your credit card. Sure, Amazon.com probably keeps your information well-protected, but SuperCoolWidgets4Less.com maybe not so much. While you believe the site itself is not going to intentionally misuse your information (if you don’t believe this, don’t shop there), you’re not so sure that their employees are all trustworthy, or that they have paid as much attention to securing your data as you would like them to. By setting up a single-payee card for this vendor, you would be able to make your purchase, and then know that if your account information is compromised, the thieves would only be able to use it at that vendor’s site. What’s more, you could simply cancel the card as soon as you had completed your transaction, ensuring any would-be thieves would have only some useless numbers and no access to your credit.
2. Recurring Payments
The other clear use case for these kinds of cards is recurring payments. Once you’ve cancelled a service, you can immediately go into your bank or credit card’s web site and cancel the card associated with that vendor, too. This ensures that they will be unable to keep reaching into your wallet without your consent after you’ve cancelled your service with them. The “nuclear” option no longer inflicts massive collateral damage, as the consumer is now able to target a specific vendor with the cancellation of a specific card.
What About Fraud?
The other side-benefit of this product, if it became mainstream, is that fraud would be dramatically reduced. You hear about how some high-profile sites are hacked, credit card details are lost or stolen, etc. You don’t hear about the not-so-high-profile sites where this happens, but believe me, it happens. The smaller sites probably don’t even know they’ve been hacked, because they lack the security assets of the larger organizations to audit and track down such access to their systems. If identity thieves and hackers retrieved credit card details that were only usable at the site they were used on initially, it would greatly reduce the value of this data, and would make it much easier for consumers and credit companies to detect such illicit usage and shut it down quickly. Since fraud is a huge cost center for credit card companies (since they typically don’t hold the cardholder liable for fraudulent charges), they should be very much in favor of developing a product like this.
What do you think, have you encountered a situation where having a single-vendor credit card would have been useful? What problems do you see with this approach? I’m curious to know if any banks or credit card companies are currently offering this as a service, and how well it’s working. And of course, I’ve patented this idea and expect to be paid millions if any big companies do implement it (right…).
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Steve is an experienced software architect and trainer, focusing on code quality and Domain-Driven Design with .NET.