Credit Cards What Is Credit Card Authentication? By Logan Allec Updated on April 26, 2022 Reviewed by Erika Rasure Reviewed by Erika Rasure Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. learn about our financial review board In This Article View All In This Article Definition and Example of Authentication How Credit Card Authentication Works Types of Credit Card Authentication Authentication vs. Authorization Photo: Nastasic / Getty Images Definition Credit card authentication is the verification of the identity of someone who presents a credit card for purchase. Key Takeaways Credit card authentication is the process of verifying the identity of someone who presents a card card for purchase to ensure they are the card’s owner.The four possible credit card authentication methods are knowledge, inherence, ownership, and location.Credit card authentication methods are continually evolving to ensure security and prevent fraud. Definition and Example of Credit Card Authentication Credit card authentication is the verification of the identity of someone who presents a credit card for purchase. If this verification can’t be made, the authentication will fail, and the transaction will be declined. For example, if you use your credit card to pay for gas at the pump, you will likely be prompted to input your billing address ZIP code. If you input the incorrect ZIP code, the authentication will fail, and the transaction will be declined. This is a form of credit card authentication to ensure—albeit imperfectly—that you, the individual presenting the card for payment, are the card owner. How Credit Card Authentication Works When you present your credit card to make a purchase, the merchant likely does not know if you are the actual cardholder. This is especially true for payments made online, in which neither you nor the card are ever seen by the merchant. This is where credit card authentication comes in. By putting in place authentication measures—even simple ones such as ZIP code verification at the gas pump or password input for an online purchase—merchants and credit card issuers can reduce credit card fraud. While no form of credit card authentication is completely fail-proof—a thief who stole your wallet could look at your driver’s license to know your ZIP code, and a hacker who obtained your credit card information could have obtained your passwords—authentication provides some security against fraudulent transactions. Types of Credit Card Authentication There are four possible methods for credit card authentication: knowledge, inherence, ownership, and user location. Knowledge Credit card authentication by knowledge is done by verifying that the customer knows something only the cardholder would know. For example, an online store may require you to input a password associated with your card that only you, the cardholder, would know before completing your credit card transaction. Inherence Credit card authentication by inherence is done by verifying the customer has attributes that are inherent to the cardholder and the cardholder only. For example, a merchant may use your biometric information, such as fingerprint, facial, palm, or voice recognition, to authenticate that you are, indeed, the cardholder. Ownership Credit card authentication by ownership (or possession) is done by verifying that the customer has something that only the cardholder would have. For example, an online store may require you to input a code sent to your mobile phone before completing your credit card transaction. Signing a receipt is another form of ownership-based authentication, although signature-based authentication is increasingly being viewed as an obsolete form of authentication. User Location Credit card authentication by location is done by comparing the location where a credit card is being used to the customer’s billing address or the vicinity where they usually use their credit card. For example, if you typically use your card in Texas, a charge on the card in Australia could fail to authenticate, in which case the transaction would be declined. Note If you plan on traveling abroad, make sure you notify your credit card issuer about where you are going so your card is not declined due to authentication issues. As technology moves forward, so do credit card authentication methods. For example, signing credit card receipts and even password input are increasingly being viewed as obsolete forms of authentication, while advanced technologies, such as biometric identification, are increasingly being adopted. Credit Card Authentication vs. Credit Card Authorization Credit card authentication is not the same as credit card authorization. While authentication has to do with verifying a customer’s identity, authorization ensures the card itself is good to make the purchase for which it was presented. When a card issuer authorizes a transaction, it’s signaling to the merchant that the merchant will be paid. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Mastercard. "Signing Off: Mastercard Moves Beyond Signatures Worldwide." Accessed Oct. 26, 2021. Visa Consulting & Analytics. "Accelerating the Shift to eCommerce." Page 4. Accessed Oct. 26, 2021.