http://moneycentral.msn.com/content/Banking/creditcardsmarts/P108369.asp

Plastic doesn't go bad, but the magnetic strip on the back does. Besides, it gives your bank a nice excuse to keep in touch.

By Bankrate.com

Q: What does your credit card have in common with a carton of milk?

A: Both have an expiration date.

But while it makes sense that dairy products go bad, what gives with the don't-use-after date on plastic?

The truth is that different companies include it for different reasons. But in most cases, issuing banks and credit card associations like MasterCard and Visa cite fraud protection and the lifespan of the magnetic strip as the main reasons to include an expiration date on cards.

"It's pretty much two reasons," says Seth Eisen, spokesman for Visa USA. "The first is cardholder security, to protect against identity theft and fraud."

Betty Reiss, spokeswoman for Bank of America, agrees. "It provides another verification point," she says.

Expiration dates tend to be more effective as another layer of fraud protection when transactions are processed manually, says Lynne Strang, vice president of communications for the American Financial Services Association, a trade association for companies that issue credit.

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In the United States, the expiration date becomes "less significant" for fraud prevention "because most transactions are authorized electronically," she says.

The second reason for an expiration date? Unlike a diamond, plastic isn't forever. "The magnetic strip disintegrates over three to four years," says Janis Tarter, spokesperson for Citi Card.

Sometimes the magnetic strip "gets worn off or gets cracked," says Eisen. By supplying new cards on a regular cycle, the companies insure that "the magnetic strip is functioning the way it was intended," he says.

"There also might be updates on that magnetic strip," Eisen says. "It allows the issuer to update that information."

The lifespan of a credit card is "at the issuer's discretion," he says, meaning it's the issuing bank or credit union that decides your card's shelf-life. "The average is approximately three years," he says.

No single right answer
Credit industry watchers see myriad reasons for expiration dates, including the opportunity to take a current snapshot of your personal information to market other services; a chance to reassess your risk, or even just an excuse to remind you that you have credit available.

If you've had the card for a few years (and especially if you haven't used it lately), the company would probably welcome a chance to re-establish contact, says Robert Manning, author of "Credit Card Nation."

"It's a way of finding out if there's a person still associated with the card," he says. At the same time, it's also an opportunity for the issuer to update the information they will use to market services and products to you, Manning says.

When you get a notice from your card company, it's rarely good news, says Manning. "This is a point of contact that triggers a positive response from the consumer," he says.

And "if the account hasn't been used, it might trigger a memory," says Manning.

Some credit industry watchers believe that, like the appendix, a credit card expiration date is one of those things that used to be a lot more practical than it is now.

It's likely a holdover from the days when credit cards companies couldn't check your credit records as regularly as they do now, says Michael Staten, professor and director of the Credit Research Center at Georgetown University. So they built in an escape clause. After a couple of years, if you weren't the customer they thought you were, companies would have the right to change the terms or get out of a contract altogether.

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But modern accounting methods and contracts have pretty much negated the need for an escape clause for credit card issuers. Credit issuers can and do check up on clients when they believe there is a need and the customer's rate may change accordingly.

"These days it has been ingrained as such a part of risk management they can flag an account every couple of weeks," Staten says.

And the Truth in Lending Act has allowed those kinds of changes for "a very long time," says Jean Ann Fox, director of consumer protection for the Consumer Federation of America. What you should know: Issuers can change any material terms on your card contract with 15 days' warning, says Fox.

What about debit cards?

Many banks also use expiration dates on their debit cards, citing fraud protection as the reason.

"With our check cards, which are Visa check cards, Visa requires us to have expiration dates as a security measure," says Mary Beth Navarro, communications manager for retail banking for Wachovia.

The extra bit of information is meant to verify identity if the consumer uses the card online or by phone.

Wachovia also puts dates on its own ATM cards, Navarro says. "The reason we leave them on ATM cards is we don't want to confuse customers, where they have expiration dates on some of their cards and not on others," she says.

And, as with credit cards, banks want current information so that they can market their products more effectively, says Manning. "It's an easy way of collecting information on the account," he says. "The key is to cross-market a lot of these products they have."

Time's (almost) up?
So what do you do if your plastic is nearing its expiration date?

First off, start watching the mailbox. Banks and issuers will typically send out the new card the month before or the beginning of the month during which your current plastic expires, says Staten. It can vary, though, so if you have any questions, call the issuing bank.

This could cause problems if you are traveling or otherwise unavailable when your old card expires. Before you hop on that plane, check the dates on your plastic. If your card's nearly up, either arrange for them to overnight a new one or take another piece of plastic.

Another thing to check with a new card: terms. In an age of multiple bank mergers, new plastic often signals new terms on your account. So grab that magnifying glass and read the contract thoroughly. What's the APR? What's the billing cycle and due date? What are the circumstances that could trigger a late charge or bad mark on your credit?

And if you don't like the terms of the new contract, don't use the card. Cut it up and notify the company in writing. Many will let you pay off your balance under the old terms as long as you don't use the card again.

You might also want to take a look at how much time they've given you before the new card expires, says Manning.

"They may have a profile of this person as someone who's moving a lot or have something in the account information where they are labeled a higher risk," he says. "If I get an account that has an expiration date of less than four years, I would call up and find out what they've done to label me."

While the bank might not reveal "the nitty gritty, they should be able to tell you why it's two years rather than four," he says.

If you activate the card, be careful what information you release. Assume any phone numbers or e-mail addresses will be used for marketing. "Most people don't think that way," says Manning.

"Don't use the telephone number you use for your personal calls," he says. Give them the same e-mail address you use in situations where you expect spam, he says. "Don't let them clog up your system."

And cut up the old card once you've activated the new one.

So is an upcoming expiration date a good time to talk terms with your card company?

"It's always a good time to renegotiate," says Staten. "If you think you're in a position where you think the issuer would be sorry to see you go, you can always call and bargain for a better rate."


-- By Dana Dratch