The three-digit code on the back of your credit card could be the only barrier between you and a credit card thief. Entering the three-digit security code is a requirement to use most credit cards online, but never assume that all merchants are trustworthy. Scam artists often set up fake websites or send fraudulent emails to trick you into giving up your three-digit code and other credit card information.
Credit cards contain a three-digit code -- sometimes a four-digit code -- as an added layer of security against credit card theft. You only need to enter this for purchases that do not require the physical card. The thinking behind the security code is if a thief copies a credit card number after looking at it, he probably won't have enough time to see the security code or it would take too long to guess it.
Online merchants cannot store security codes on their databases, so you must enter it in manually for each transaction. This does not preclude other programs from remembering and potentially leaving your security code exploitable. Browsers, for example, often come with a feature to automatically fill in any entry field. Someone could get on your computer and see the security code, sometimes accidentally if they have a card that starts with the same number.
Only give a security code to trusted merchants. Be leery of anyone who calls up and asks for your credit card information. A common con involves the fraudster calling up random people and claim to be from a credit card company. A typical story involves fraudulent activity on your account and the security team from the company needs your three-digit code to prove you still have the card in your hands.
If you have given out your security code to anyone you suspect might have misrepresented himself, call your credit card company immediately and inquire about any potentially fraudulent purchases. As long as you catch a fraudulent purchase within 60 days, you are not legally liable for more than $50 according to the Federal Trade Commission.