A: The numbers to which you refer constitute the card security code. (American Express has its four-digit card security code on the front, above the account number.)

 

You’ll notice they’re printed on the card, rather than embossed. Online merchants ask for the codes as a way of proving that you actually have the card in your possession and didn’t just pick up somebody else’s credit card receipt.

 

It’s a matter of self-defense. When a bricks-and-mortar merchant approves a fraudulent purchase, the credit card issuer often reimburses the loss as long as the merchant has the customer’s signature on a receipt. Without a signature, though, a merchant’s exposure is higher; it can face “charge-backs,” under which the fraudulent purchase amount is rejected by the credit card company, leaving the merchant to shoulder the loss.

 

Asking for the code doesn’t winnow out the thieves who actually have stolen cards in their possession, or who photocopied someone else’s cards. But it does eliminate the most casual of identity thieves, and every little bit of prevention can help a merchant’s bottom line.

Question: Until a few years ago, my late husband and I traveled a good deal and maintained a high limit on our credit cards. He has now passed away. I travel far less and no longer have a need for so much credit. I would like to have my limits reduced, but fear doing so would have a negative effect on my credit rating. Is this correct?

 

Answer: Lowering your credit limits may indeed hurt your credit score, the three-digit number lenders use to help gauge your creditworthiness. The scoring formula measures the gap between the credit you have and the amount you actually use. The wider that gap, the better.

 

Unfortunately, there is no way to determine in advance if the lowered credit limit will affect your score, according to Fair Isaac Corp., creator of the FICO credit score.

 

But the damage of lowering limits on a card or two may not be that severe if you don’t use the cards that much and already have a high credit score — which is likely if you have a long credit history, are never late on your payments and don’t max out your cards.

 

If you have reason to think your credit score may be on thin ice, on the other hand, it may be best to live with the higher limits as long as you are confident you can resist the temptation to charge away.