What is OTP in for Credit Card Transaction? And Why are They Important?

We live in an age of online transactions and money transfers. However, online transactions come with the fear and potential for misuse and theft. To tackle this, RBI has mandated several security measures to comply with all transactions. Every time you make an online transaction, you might notice that your credit card requires an OTP code to validate it. But what is OTP and how does it come into play for a credit card transaction?

What is OTP and How Does it Work?

OTP stands for One-Time Password. It is a unique, temporary code consisting of four to six numbers randomly generated by the bank or the credit card issuer to authenticate credit card transactions.

• OTPs are designed to maintain high security and minimise the risk of fraudulent attempts. This is how:
• When you enter your credit card details for a transaction, the card network provider contacts your bank and routes the credit card information.
• The bank or credit card issuer will verify the information, such as the account number and CVV, and check the remaining credit to cover the expense.
• The merchant’s bank receives the information after verifying and checking its authenticity.
• Lastly, you will receive an OTP code to process the transaction and complete your purchase.

Advantages of Using OTP in Credit Card Transactions

OTPs have several benefits, and here are some of the key ones to consider:

1. Additional Layer of Security

OTP reduces the possibility of identity theft as it is sent to your email or mobile number. The OTP code changes for every credit card transaction, making it impossible to guess or replicate. It also acts as an additional layer of security, ensuring that only you can access the information.

2. Time Limited Usability

The OTP is generated only for a few minutes, usually 8 to 10 minutes, after which it expires. So, if someone gets access to your OTP, they will not be able to authorise the transaction after the OTP expires.

3. Two-Factor Authentication

This is a complex form of authentication built to protect your credit card. For instance, if you are paying via credit card, you will first enter your credit card credentials, and the second level will be the OTP authentication, which is sent to your mobile device or email. One Credit Card allows you to authenticate yourself with an OTP for any online purchase.

4. Transaction Alerts

If you receive an OTP code without initiating a credit card transaction, you will be aware of potential fraudulent activity and can take immediate action.

Also Read: How To Protect Your Credit Card Information Online.

Tips to Use Your OTP Wisely

OTP requires you to be cautious while using it for credit card transactions. Consider these factors while using your OTP code to verify online credit card transactions:

1. Keep OTP Private

Treat your OTP as a secret code and avoid sharing it with anyone else. Watch out for your devices and keep them safe so people cannot access your credit card details or OTP. Make sure to lock your devices with a strong password or biometrics to avoid unauthorised access.

2. Use Only on Official Channels

Use your OTP only on official trusted channels, apps, or websites. Check the authenticity of the website or portal before initiating a credit card transaction and entering any OTP.

3. Update your Details

If you change your mobile phone number or email address, inform the credit card issuer or bank to update your records. This way, you can continue receiving SMS alerts on transactions to authenticate your identity.

4. Provide OTP only During Transactions

Provide your OTP only after you have used your credit card for a certain transaction. Banks or credit card issuers do not randomly ask for your OTP. Watch out for such false calls and act accordingly.

In conclusion, OTPs serve as an invaluable layer of security for credit card transactions. They are one of the catalysts behind the surge in credit card usage in India. OTPs are a great way to deter potential scams and keep your credit card safe and secure. So, follow these tips above and use your OTP wisely to avoid any misuse of your credit card.