How the Latest Generation of Credit Cards Protects Your Information From Theft
Have your credit card information been stolen recently? You’re not alone. This has happened to me a couple of times in the last year, and it annoys me as hell. Fortunately, credit card companies are finally solving this problem with technology that is only now reaching the full extent of the United States.
If you recently received a credit card in the mail, you probably noticed that it has a small chip on it. Or maybe you’ve heard of people talking about chip and PIN technology. These chip cards, also known as EMV cards (which stands for Europay, MasterCard and Visa), are designed to help reduce credit card fraud. This technology has long been used in many European countries, but finally it has become popular in the United States. That’s a good thing since the US accounted for 72 percent of all credit card data breaches in the world last year. This is how these new cards work.
Forget about the streak. You will have a chip
With a traditional credit card, the information associated with your magnetic stripe does not change. If someone gains access to it, they will have access to your credit card information until you cancel it and receive a new one. With this new chip technology, every time you use your card, the chip creates a code unique to that transaction. If a hacker steals this code information, it will be useless. Other countries have been using chip cards for many years and this is really effective in fighting fraud.
You will still use your signature as long as
Other countries are using chip and PIN technology with these new cards. Besides the chip, this technology requires you to remember a PIN for every credit card you use. In the States, most new cards do not have the required PINs. At the moment we are using the “chip and signature” method, which means that we will use our signature to close the transaction, as we did with our old cards. Sushil DaSilva, co-founder of Highline Software , says we will eventually be using PIN verification, probably in the next few years. The issuing banks wanted to first implement the chip technology and then implement the PIN method as soon as consumers get used to the change, he said.
Yes, there are disadvantages
Our chip and signature method can create a problem if you are visiting a country that has a chip and pin. Since other countries use PIN codes to confirm purchases, you may not be able to process your card with some foreign merchants. This is unusual, but still something to keep in mind if you are traveling. Some travelers ask their credit card issuer for a PIN to use it to withdraw cash from ATMs, but this is not the same PIN. As one expert at CreditCards.com put it:
“If I go to France, where the chip and PIN are sometimes the only choice in these terminals, many times I will need a new card.”
You should be able to use the PIN that you requested at the ATM to receive cash, but not to purchase, say, at a train kiosk, which requires a card with a chip and PIN to make a purchase.
Unfortunately, if you are traveling without a card with a PIN other than cash, your only recourse is to get a new card with a “chip and PIN”. However, most machines will simply accept your signature.
Plus, since most chip cards don’t require a unique PIN, if a thief steals your physical chip card, he can probably still use it easily anywhere. Thieves can still use your EMV card to shop online. Since you don’t pay through an online terminal, all a hacker needs is your credit card number, expiration date, and a three-digit security code. Someone can get this information if they get hold of your physical card, but they cannot get this information from a hacked chip transaction, because the code is unique.
DaSilva points out why EMV technology is still useful:
Physical card theft is a fraction of card fraud. The real problem is that magnetic stripes can be copied and cloned at will.
Essentially, this technology will protect your card from cloning and copying. Since every transaction is unique, thieves will not be able to access and reproduce your data.
Instead of swiping, you will “plunge”
Instead of swiping the card, you now insert it into the machine. Some retailers call this “dipping.” You may have already seen this technology in some stores. After you dip, you leave your credit card in the terminal until the transaction is completed. Some EMV cards may also support NFC technology , which means you can simply tap your card to pay.
EMV adoption will be gradual, so you can still use your EMV card in retail stores that have not upgraded their terminals and are still using the old swiping method.
Unfortunately, the full transition will take some time.
The major card chains (Visa, Discover, MasterCard, and American Express) are responsible for this shift, and they have given banks and retailers an October 1 deadline to begin issuing and adopting the new technology. If they don’t, retailers or issuing banks will be on the hook for any kind of fraudulent transaction.
However, this is a soft deadline, so don’t worry if you haven’t received a new card in the mail. Retailers and banks are introducing this somewhat incrementally, and experts say it may take several years before we all start exclusively inserting our cards instead of passing them. MasterCard product expert Carolyn Balfani told Tech Times that she expects about 65 percent of cards to be chip-equipped by the end of 2015, and half of merchants will be upgraded. Debit cards will be issued more slowly, according to Creditcards.com. Experts expect that 96% of debit cards will switch to this technology by 2017.
If you already have a chip card and have been to Target or Costco recently, you’ve probably tried this new technology. It’s easy enough to use, so it doesn’t take long to get used to being “immersed” in the swipe. This is a small price to pay for increased security.