CVV2 - Explained

Monday, October 28, 2013


Credit card fraud is a 52.8 BILLION dollar industry so its no surprise that there are lots of tools available that are designed to prevent credit card fraud. The Card Verification Value (CVV2) is the 3 digit code on the back of the credit card (4 digits on the front of AMEX cards). The 3 or 4 digit code is designed to add an extra layer of credit card fraud protection although many experts question its effectiveness. Knowing what the code is for and how the code is used can be a big help.

The major card brands added the CVV2 codes in response to growing internet transactions and card member complaints of spending interruptions when the security of a card had been brought into question. Since the CVV2 code is not stored on the magnetic stripe, it added an additional way to verify if the credit card was in the hands of the user. MasterCard added the 3 digits in 1997, American Express joined the party in 1999 and Visa followed in 2001.

Today, the CVV2 code is used primarily in 'Card Not Present' transactions. We are even seeing some larger merchants accept the CVV2 information in lieu of a signature; we consider this to be a RISKY move since a signed receipt is still your best protection against disputed transactions. Merchants can require the 3 or 4 digit code in an attempt to verify the validity of the card. The downside of this fraud protection measure is that not all card issuers use the code the same. Some card issuers will decline a card when the 3 digit code does not match and others don't. Some card issuers give additional weight to chargeback cases when the 3 or 4 digit code is entered and others don't. The inconsistency of the way the CVV2 code is used is what adds to the argument that it is not a very effective fraud prevention tool. As a small business owner, I just like the idea of having a myriad of tools available to help limit my exposure to fraud, so we advise all of our merchants to use the CVV2 code whenever possible. Here are a few more pieces of information on that pesky little code!

  • Merchants are not allowed to store the CVV2 code
  • When the CVV2 code wears off, cardholders should replace the card immediately
  • Using the CVV2 code does not guarantee anything (use it anyway!)
  • The CVV system is not always available
  • The CVV2 does help limit credit card fraud, skimming specifically, since it is not stored on the magnetic stripe

At the end of the day, the CVV2 will not go down in history as a massively effective tool against credit card fraud however, merchants would be wise to use whatever tools they have at their disposal!

Cheri Perry 10/28/2013

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