The small Bournemouth-based Frizzell Bank cancelled the cards after uncovering a range of fraudulent transactions in the Far East and fears that fraudsters would be able very quickly to counterfeit a series of cards.
The large-scale cancellation earlier this month was described as highly unusual by some rivals and "embarrassing, particularly at this time of the year". The run-up to Christmas is a peak period for credit-card use.
All affected cardholders are having their pounds 11 annual fees refunded. Some customers left high and dry abroad have been paid individual compensation of up to pounds 150. Cardholders have been sent letters telling them that their old cards have been cancelled and will not work, and by now should have received replacement cards. The fee refunds will follow in subsequent statements, the bank says.
Hugh Baird, group banking director at Frizzell, said cancelling so many cards was justified and happened more often than card companies admitted. "It's like losing a bunch of keys. You have to change all the locks." The bank said it had tried to contact cardholders by telephone the day it moved to cancel the cards.
Mr Baird conceded that a small number of cardholders who were travelling had had difficulties when their cards were cancelled without warning, and these individuals were given personal compensation.
Cardholders have been warned to look out for unauthorised transactions on future bills and told they will not be held liable for these costs. The pounds 11 fee refund reflected the "inconvenience", said Mr Baird.
The Frizzell Bank Visa and Mastercards can be attractive to people who travel a lot because they offer a better exchange rate on transactions than virtually any other card. Most cards "load" underlying exchange rates by up to 3 per cent (although this is still better than buying local currency from a bureau de change), but Frizzell has no loading, making purchases up to 3 per cent cheaper than with other cards. The Frizzell cards can also be good value for withdrawing local currency from cash machines.
The Frizzell frauds stemmed from the electronic copying of information stored in the magnetic strips of genuine cards, and replicating other cards by experimenting with number sequences. Apacs, a body representing card issuers and companies involved in payment systems, said this electronic counterfeiting, or "skimming", was a growing area of card fraud.
Most card companies rarely hold individuals liable for the cost of fraudulent transactions not their fault, although some reserve the right to charge up to pounds 50, and people have been asked for higher repayments where they are deemed to have been "grossly negligent", such as where a holder has written a PIN number on a card that is then stolen.
Card companies are now testing computer chips on cards, in the hope that these will be more secure than the present magnetic strip technology.Reuse content