Success story: Year 2000 credit cards will work fine

WASHINGTON -- When President Clinton gives a scheduled speech on the Year 2000 computer menace, he'll also have some good news to share: Credit and debit cards bearing expiration dates after December 1999 will work just fine.

This unheralded success story is the result of a long-term, industry-wide campaign to quash the so-called millennium bug -- an effort that has cost hundreds of millions of dollars and involved thousands of skilled workers.

As a result, American Express, beginning in June, will for the first time widely issue credit cards due to expire in the next century. Except for enrollees in a special Amex testing program, card holders whose cards expired this May or earlier have received new ones good only for one year. "We have just completed our worldwide testing program and we feel very comfortable that we can now support these new extended-issue cards," said Molly Faust, a company spokesperson. Last year, Visa barred its members from issuing Visa-branded cards with expiration dates of January 2000 or beyond. But now Visa has quietly lifted the ban. "The industry has turned around magnificently," says Sam Galdes, senior vice president of Visa U.S.A. MasterCard, which last year had 341 million cards that carry its brand in circulation, never imposed a ban. But until recently it has asked its members to exercise caution in issuing cards with "00" expiration dates. A spokesperson for Novus Services said that "virtually 100 percent" of the more than 3 million merchants who accept Discover cards had encountered no problems with cards due to expire in the year 2000 or beyond. The Year 2000 computer problem -- by no means confined to credit cards -- arose because many older systems use a double-digit dating system. Such systems will read the digits "00" not as 2000 but as 1900. That could cause an authorization terminal that hadn't been refitted for Year 2000 compliance to reject a credit card. As the deadline approached, the industry last year formed an ad hoc council to develop a coordinated plan to deal with the millennium bug. That led to a worldwide campaign to persuade vendors to upgrade their hardware and software so cards with "00" expiration dates wouldn't fail at checkout counters. The team effort yielded seminars, workshops, brochures, Internet sites and special assistance programs -- all aimed at educating millions of merchants on the potential peril facing their businesses. The program also offered equipment discounts to merchants as incentives to install Year 2000-compliant card readers in retail stores. The repair job was both difficult and costly. Thus, Citicorp, a major issuer of credit cards, told the Securities and Exchange Commission this year that converting and testing all its computer systems to handle dates after Dec. 31, 1999, would cost the firm some $600 million. Last year alone, Citicorp spent about $150 million on its piece of the millennium retrofit. With nearly all the fixes in place, Visa's Sam Galdes says that 99.9 percent of all transactions should move through the authorization and settlement process without a glitch. To ensure that the terminals of its participating merchants can cope with the new century, the company has created a site on the World Wide Web entitled "Visa and the Year 2000 Challenge." It includes a comprehensive "Year 2000 Checklist" and answers technical questions about the impact of the bug on VisaNet, its global payment network. Said David Africk, a MasterCard International senior vice president who deals with Year 2000 issues: "We know there will always be one (terminal) out there, someplace, that creates a problem, but we think the problem, generally, has been 99.98 per cent resolved." MasterCard has also set up a Year 2000 Web site to foster compliance. The site urges its family of merchants to "inventory all hardware and software used in processing date-sensitive data." All this activity has seemingly paid dividends in terms of completed sales and consumer satisfaction. The National Retail Federation, which last year sought to keep banks from issuing long-term cards, has reversed course. As Cathy Hotka, a federation vice president, told "Credit Card Management," a monthly industry magazine: "When we first heard these cards were going to be released, we braced ourselves for an onslaught of problems. Frankly, we've rarely heard about any problems. What I think this all shows is that people will get through the Year 2000 problem if they work together."

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