Wednesday, July 24, 2024

Latest Posts

The Hidden Side of Credit Cards: How Recurring Charges Persist and Balance Transfers Impact Your Credit Score

A common belief among consumers is that canceling a credit card will stop recurring charges from services like Netflix. However, this is a myth.

According to one report, nearly 46% of Americans opened a new credit card last year. When they switch cards, subscription services like Netflix don’t simply stop; they start charging the new card. This is made possible by a largely hidden service that allows subscription services to continue charging you indefinitely.

“Banks can automatically update credit or debit card numbers when a new card is issued. This update allows you to continue charging your card, even if it has expired,” Netflix explains in its help center.

This feature is offered by most major card providers, including Visa. In 2003, Visa U.S.A. introduced a software product called Visa Account Updater (VAU) for merchants. The service works with a network of banks to create a virtual tracking service for Americans’ financial profiles. When someone renews or changes a credit card within their bank, the institution automatically updates the VAU. This system allows businesses to charge any card on file, ensuring a seamless switch that keeps dollars flowing.

VAU was quickly adopted by banks and businesses around the world. It follows you every time your issuer switches to one of the major credit card providers. However, if you close an account completely or switch to another credit card provider yourself, the VAU will simply list your account as closed.

Some clients of Visa’s tracking service include Netflix, Amazon, Facebook, Google and Disney. While VAU allows merchants to keep customers locked into their subscription services, Visa argues that this also benefits customers.

“Visa Account Updater (VAU) was built to help ease the burden on consumers of inputting a new account number and expiration date in recurring subscriptions,” a Visa spokesperson said.

However, these practices can also keep people locked into endless cycles of payments.

In another aspect of credit card management, balance transfers can affect your credit score. When you transfer a balance to a new card, your old card balance will be $0, unless you have pending purchases or are unable to transfer the full amount. Once you’ve paid off the balance on your old and new cards, consider keeping them open for the sake of your credit score and any benefits the card offers.

Closing a balance transfer card may cause a temporary negative impact on your credit score, but it won’t derail your credit in the long run. You can also keep your balance transfer credit card open to lengthen your credit history and stabilize your utilization rate.

More for you:

Latest Posts

Don't Miss