What are the safety risks of storing credit card information on websites?

Online checkout can be much more convenient when credit card information is already stored on a retailer's database. But concerns of security may prevent shoppers from doing so.

However, credit card safety online does not have to be a guessing game. Knowing the potential security risks — and ways individuals can protect themselves — can go a long way in helping to safeguard financial transactions.

How does stored credit card information work?

Retailers frequently request that customers store their credit card information on their sites for faster checkout. This sensitive information is typically encrypted on the website's servers or their payment vendor’s servers.

One common form of credit card encryption is called credit card tokenization. With this method, payment encryption replaces the credit card number with a randomly generated token or code. The token itself cannot be used to make fraudulent purchases since it can’t be translated back to the original card number without an encryption key.

To help monitor and bolster security for online transactions, the payment industry created a set of standards called the Payment Card Industry Data Security Standard (PCI DSS). It features 12 requirements that merchants must meet to help protect customers' data security – from ensuring that a firewall is in place to protect cardholder data to encrypting cardholder data and restricting access to it. These standards can help reduce the risk of data breaches for both merchants and consumers.

What are the potential risks of storing credit card information on websites?

With no shortage of malicious actors out there trolling for customer data, there are a number of potential risks to storing credit card information on websites, even reputable ones. Here are some of the most common risks:

• Data breaches: Despite following all recommended security protocols and standards, data breaches can still occur. Hackers are smart and continue to steal large amounts of customer data, including credit card information.
• Weak passwords: If credit card information is stored on online accounts with weak passwords, it opens up the possibility of a hacker guessing the password and accessing that credit card information.
• Compromised passwords: Unique passwords should be used on all online accounts; otherwise, it opens the risk of hackers using a compromised password from a previous data breach on another site to access an account where credit card information may be stored. If the same passwords were used on both accounts, credit card information can be exposed.
• Phishing attacks: Many phishing attacks involve fraudsters sending emails or texts claiming to be from a reputable company that a consumer does business with and provides a link to the company's account. When the customer clicks on the link, they’re taken to a website or form that’s designed to look legitimate. Once the user puts in their password, the fraudsters can log into the account and access their credit card information.

What security measures are taken by websites?

Websites can use a variety of security measures to help protect stored customer data and provide greater credit card security for online transactions. Here are ways companies can help protect user information:

• Encryption: Most websites use encryption, such as card tokenization, to store credit card information. This can also include website encryption, which protects communications between the company and the user.
• Multi-factor authentication (MFA): MFA enhances the security of online accounts by requiring additional verification factors beyond the standard username and password. MFA requires the person accessing the account to prove they are the account's owner by using a combination of two or more independent credentials.
• Secure Sockets Layer (SSL) certificates: SSL certificates ensure an encrypted connection to a website. Unsure if a website has one? If its URL starts with "https" instead of simply “http,” that means that it uses some kind of secure, encrypted connection.
• Firewalls: Firewalls are additional security layers that protect a company’s databases from hackers.
• Intrusion detection systems: This technology monitors systems and databases to ensure that there is no unauthorized access. The merchant is then alerted if a data breach is detected.
• 3D Secure: Many major credit card issuers use a technology called 3D Secure that's built into their payment processes. It helps to verify a person’s identity before a transaction goes through by using two-factor authentication (2FA).

How to balance convenience and security when shopping online

Not having to input a credit card number at every checkout can save a considerable amount of time. But how does one balance the convenience of a faster checkout with security? Here are some tools to help mitigate security risks:

• Digital wallets: Digital wallets enable the storage of credit card information locally on a personal device rather than on a merchant’s website. This way credit card information can be shared with a merchant without it being stored indefinitely on their site.
• Autocomplete: Many devices and browsers enable autocomplete for credit card information. It's a feature that predicts and fills in necessary fields as a customer starts typing, like names, addresses and payment methods. In these scenarios, payment information is stored locally on the user’s device or browser, not externally.
• Guest checkout: Some websites will automatically save a buyer’s credit card information when they create an account. But if choosing guest checkout, a company will not store credit card information related to the purchase.

Learn more about PayPal checkout.

What are some safe online shopping tips?

One way to avoid credit card fraud is to create secure online shopping habits. Following these safe online shopping practices is a good start:

Use strong passwords, a passkey, and multi-factor authentication

Since credit card information could be compromised if someone gains access to an account by guessing the password, make sure to create unique, strong passwords for every account.

A strong password should be over 10 characters and include a combination of letters, numbers, symbols, and capital letters. For example, doglover86 wouldn’t be considered a strong password but D0gL0v3r_86$*# would.

Consider enabling multi-factor authentication (MFA) wherever it’s available. It requires that customers prove that it’s them in two or more ways before they’re allowed access to their account. That typically involves providing a password but also verifying one's identity via SMS verification, email verification, security keys, passkeys, or more.

Be careful of unfamiliar websites

Before storing credit card information on an unfamiliar website, make sure it has taken proper security measures (for example, having "https" in the address bar, a privacy policy, a padlock icon, and security certifications). Red flags that a site is potentially a scam include grammatical errors, an outdated design, unrealistic offers, or attempts to impersonate another website.

Try virtual credit card numbers

Virtual credit card numbers are one way to avoid credit card compromises. These are one-time-use numbers that many credit card companies will generate for their customers solely for online purchases. Valid for just one transaction, they may be a safer bet than using an actual credit card number if one is worried about storing their information online.

Make sure to monitor credit card statements

Regularly monitor credit card statements to identify any suspicious activity and take action on any fraudulent transactions immediately. Customers should consider using a credit card with limited spending power specifically for online purchases if virtual credit card numbers aren’t offered by their credit card company. This can minimize potential damage from a breach.

Also, sign up for email or text alerts for suspicious activity. If fraudulent activity is detected, dispute the transaction right away. Most companies allow you to do this either by phone, online, or via app.

Stay secure when shopping online

Online shopping is very convenient and, for the most part, can be safe. However, it’s key to remember the importance of online security and to keep these takeaways in mind when making online purchases:

Reduce risk

Try virtual credit cards, digital wallets, or credit cards with low purchasing limits to help reduce the potential impact of fraud. Make sure to use unique, secure passwords at all times and enable multi-factor authentication (MFA) whenever possible.

Be aware

Look for signs that a website is fraudulent and check that it’s following proper security and privacy protocols before providing or storing credit card details on the site.

Learn more about protecting your online accounts.