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What Is OTP In A Credit Card Transaction

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Created on
May 4, 2023


What’s Inside

Every time you make an online payment, you might notice that your credit card requires an OTP code number to validate the transaction. Plus, banks stress that you should avoid sharing your OTP with anyone to prevent unauthorised access or use of your card.

Short for One Time Password, an OTP code number is a numeric code delivered to your registered mobile number when making a payment. OTP meaning in banking is simple – it is a unique series of random numbers to validate each transaction. However, these numbers are only valid for a few minutes. The amount is credited from your card only after you enter the correct OTP.

But why is OTP so important? Why do all banks insist on using random numbers to authenticate your transactions? Stay with us as we seek the answers to these questions!

Why OTP is an Essential Mechanism

Have you noticed that most physical credit card transactions do not require an OTP?

You can simply swipe the card or insert it into the machine, enter your PIN and complete the payment. But when you shop online, no store representative exists to confirm your identity or your card’s legitimacy. Hence, there is an increased chance of fraudulent transactions or payments from stolen credit cards.

That brings us to some essential questions – What is OTP in credit card transactions, and how has it changed the payment landscape?

If you receive an OTP on your phone and have no payments pending, you can raise a dispute with the bank about leaked card details and block the card immediately.

Think of it as an added security layer. Even if your card gets nabbed or misplaced, you can rest assured that no one can use your card without an OTP.

Limitations of Relying on an OTP

In several cases, an OTP is considered a minor inconvenience. After all, checking your mobile or email ID for the code whenever you want to pay can be frustrating. But the security it guarantees makes up for the hassle it may provide.

Having said that, a persistent limitation is a considerable dependence on cell coverage to make online payments. If you are in an area with poor network connectivity, receiving the OTP code number in time and completing your purchase can be challenging.

Plus, server problems from the bank’s end can disrupt the OTP system and affect online payments.

How can you Safeguard your OTP?

The main contributor to credit card fraud is the lack of awareness. The first thing to remember is that you should never share your OTP with anyone, irrespective of who they claim to be. Plus, when using it on payment gateways, confirm that the platform is encrypted and that the information cannot be leaked.

Here are some other ways to protect yourself from OTP thefts:

  • Do not click on unknown links. They may redirect you to a website that adds malware or bloatware to your device.
  • Avoid forwarding your OTP code to someone else.
  • If your phone gets stolen, immediately contact the bank to change the registered number.
  • Use a single trusted device to receive OTPs.

Summing Up

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1) Is OTP required for credit card transactions?

OTP is required for all online credit card transactions and some physical transactions where the sum exceeds a particular amount.

2) Can credit card OTPs be misused?

It is relatively challenging to misuse OTPs unless you readily provide the code to someone else. The main reasons are that OTPs are only valid for 10 minutes and are sent through an encrypted bank network, eliminating the chances of a security breach.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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