A validation code—also referred to as a CVV, CV2, or CVV2 code—is a series of three or four digits found on the front or back of a credit card. This security feature adds an extra layer of protection for transactions occurring online or over the phone.
Most credit card issuers imprint the validation code on the back of the card, positioned to the right side of the signature strip. However, American Express cards display this code on the front of the card.
Key Takeaways
- A validation code is a crucial security measure designed to minimize credit card fraud.
- Typically, it consists of a three or four-digit number printed either on the front or back of your credit card.
- The instances of credit card fraud have surged, reaching nearly $29 billion in 2019, and are projected to climb to $38 billion by 2027. The United States accounts for approximately 34% of the reported losses.
How Validation Codes Work
With the rise in online shopping, the risk of identity theft and other credit card fraud has also intensified. One effective countermeasure is requiring validation codes for credit card purchases.
During a standard transaction, customers need to provide their name, billing address, card number, expiration date, and validation code. While details like name and address might be obtainable from other means, acquiring the card number, expiration date, and validation code generally necessitates possessing the card. Placing the validation code on the back of the card makes it more challenging for potential thieves to gather all the needed information from a single image of the card.
The entered CVV is verified against the card number to process the transaction and to confirm the user’s identity. To prevent fraud, consumer protection laws prohibit merchants from storing customers’ validation codes after a transaction. However, unscrupulous businesses might still record this information illegally.
Personal identification numbers (PINs) complement these measures, offering an additional layer of security when making payments via point-of-sale (POS) terminals.
Real-World Example of a Validation Code
Although validation codes offer extra security, determined thieves can still get around these measures. Credit card fraud continues to escalate, with over 393,207 reported cases in 2020. The United States is notably impacted, constituting around 34% of global cases.
Merchants are banned from storing card security codes post-transaction, adding another safeguard against card theft. Nonetheless, validation codes can be stolen, so cardholders need to guard them as diligently as the card number and expiration date. Stolen validation codes can facilitate fraudulent transactions.
If a card is stolen, the cardholder is liable for no more than $50 under the Fair Credit Billing Act (FCBA), provided they report the theft promptly. Cardholders should immediately contact their credit card issuer upon discovering their card is missing or noticing suspicious activity. The issuer can then cancel or deactivate the card, mitigating further risk.
Related Terms: credit card, billing address, expiration date, card number, personal identification number (PIN), point-of-sale (POS) terminals, Fair Credit Billing Act (FCBA)
References
- American Express. “Many Kinds of Cards. One Kind of Membership”.
- Nilson Report. “Card Fraud Losses Reach $28.65 Billion”.
- Federal Trade Commission. “Consumer Sentinel Network Data Book 2020”, Page 8.
- Federal Trade Commission. “Disputing Credit Card Charges”.
