A remote control for your credit card

If your smart phone is loaded with apps that sounded nifty when you loaded them but that you seldom actually use, here's a new one that might make you a repeat customer. It’s an app that lets you turn your credit card on and off, like you would with a remote control. It could be a big help if your teenager has a habit of running off with your MasterCard, but more important, it could be a powerful tool to reduce credit card fraud.

But don’t get too excited—the technology is only just beginning to be rolled out. Pretty soon, though, it should be incorporated into your mobile banking app on your smart phone.

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The technology, from Ondot Systems in San Jose, Calif., puts you in control of your all of your payment cards, whether credit, debit, or prepaid. When you are about to make a purchase, you turn a card on. You can also turn it off to prevent someone else from using it to make transactions, possibly sticking you with accruing interest. If someone else tries to use your card while you have it off, the system sends you an alert. You’ll also be able to set location preferences so that your cards work only in a particular geographic area or with particular merchants. If you have a number of authorized users on your cards, you can set limits on how much each can spend.

Lone Star National Bank, in McAllen, Texas, has been using the technology for more than a year. According to Edna De Saro, the bank’s marketing director, it has been popular with customers. But more important, it has helped to reduce the bank’s fraud rate. Desaro says fraud losses have dropped about 60 percent since the bank's customers started using the technology and debit card use increased by more than 50 percent. That’s good news for the bank, since it makes money every time a customer uses the card. Until you can use this service through your bank, it’s a good idea to keep tabs on unauthorized activity on your credit account by setting up “transactional monitoring”—a service your bank probably already offers. You set up alerts and if a transaction goes through that is higher than the limit you set, you’ll get a message letting you know.

While the benefits of having a remote control for your credit card seem fairly evident, it's not hard to imagine a downside: There could be a time when you are frustrated, standing at a store cashier, because your credit card is locked and your phone battery has died—or because cell phone reception is poor. In such instances, your card could be rendered useless. Of course, you may consider that a small price to pay for the added protection.—Nikhil Hutheesing