May 20, 2016

Chip Credit Cards

My ever curious friend, Jeff asked if I thought the new chip cards were more secure than the magnetic stripe cards, so I went hunting to find out the latest info.

More than three-quarters of a billion credit and debit cards are in use in the US. By the end of 2016, over 90 percent will be converted to EMV (which stands for Europay, Mastercard, Visa) cards with a chip. The US is one of the last markets to go to EMV, on a short list with Papua New Guinea and Mongolia.

About half of all credit card fraud happens in the United States even though the country only makes up about 25% of all credit card transactions, according to a Barclays report. Financial institutions had been required to pay for credit and debit card fraud until Oct. 1, 2015. Now whoever has the oldest technology when the fraud occurs, the bank or the merchant, determines who covers the cost for the crime.

Current US chip cards are vulnerable because they still employ the old magnetic stripes so that businesses that have not yet made the transition to EMV technology can still access users’ credit data.

The new cards do not work quite the same way they do in Europe, but they are a step closer. The type of card being rolled out in the US still requires a signature when you pay. Eventually, what will be used in the US is what is used in the rest of the world, known as "chip and PIN." It would work similar to an ATM card now. You insert your card and enter a four-digit password to approve the transaction. Security experts believe this is much safer than card and signature to pay for things.

The biggest difference between the old card and new one is the metal 'smart' chip embedded on the front, making personal data much safer (once they eliminate the stripe on the back). The chip assigns a unique code for every transaction made on the card. Even if a thief acquired that code, it could not be used to make another purchase. Chip cards are also harder to duplicate although it is not unheard of.

These new EMV cards do not contain the older radio frequency (RFID) technology from a few years ago as some older ones did. No need to worry about covering with foil, etc., as they cannot be scanned within your wallet.

The new EMV chip cards were designed to help curtail credit card fraud; however, there are still vulnerabilities with these cards. Nothing is perfect, so caveat emptor.

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