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Have you recently experienced credit card fraud? You're not alone. It's a common issue that many face, and it can be incredibly frustrating. Fortunately, credit card companies are actively addressing this problem with advanced technology now fully implemented in the U.S.
If you've received a new credit card lately, you might have noticed a small chip embedded in it. This 'chip and PIN' technology, known as EMV cards (short for 'Europay, MasterCard, and Visa'), is designed to reduce credit card fraud. While many European countries have been using this technology for some time, it's now becoming widespread in the U.S. This is particularly important, as last year, the U.S. accounted for 72% of all global credit card data breaches. Here's how these new cards function.
Say Goodbye to the Magnetic Stripe; Welcome the Chip
Traditional credit cards have static data on their magnetic stripes, which, if compromised, can be used fraudulently until you cancel and replace the card. In contrast, the new chip technology generates a unique code for each transaction. If a hacker intercepts this code, it becomes useless. Countries that have adopted chip cards have seen a significant reduction in fraud.
For the Time Being, You’ll Still Use Your Signature
Other nations have already adopted 'chip and PIN' technology, which not only includes the chip but also requires remembering a PIN for every transaction. However, in the U.S., most new cards won’t require a PIN. Instead, we are using a 'chip and signature' method for the time being, where you’ll sign to complete the purchase, just like with the old cards. Sushil DaSilva, co-founder of Highline Software, suggests that PIN verification will eventually be implemented in a few years. According to him, banks wanted to prioritize the chip rollout first and introduce the PIN system once users are accustomed to the change.
There Are a Few Downsides to Consider
The 'chip and signature' method could become problematic when traveling to countries where 'chip and PIN' is the standard. In these places, a PIN is necessary to verify purchases, and you may find your card won't work at some merchants. While rare, it's a potential issue for travelers to be aware of. Some people opt to request a PIN from their credit card issuer for ATM withdrawals, but note that this PIN is different from the one used for payments. As an expert from CreditCards.com points out:
“If I go to France, where chip-and-PIN is sometimes the only choice in these terminals, then many times I’m going to need to get a new card.”
You can use the PIN you requested for an ATM cash advance, but it won’t work for a purchase at places like a train kiosk that requires a chip-and-PIN card.
If you're traveling without a PIN-enabled card, your only other option, aside from using cash, would be to get a new 'chip and PIN' card. However, most machines will simply accept your signature as verification.
Since most chip cards don’t require a unique PIN, if a thief steals your physical card, they could likely still use it anywhere. They can also use your EMV card for online purchases. Unlike physical terminals, online transactions don't require a PIN, meaning a hacker only needs your card number, expiration date, and three-digit security code to make a purchase. While thieves could obtain this information if they steal your physical card, they can't extract it from hacking a chip transaction since the code used for each transaction is unique.
However, DaSilva emphasizes why EMV technology remains valuable:
While physical card theft is a small fraction of card fraud, the real threat lies in the ability to copy and clone magnetic stripes at will.
This technology safeguards your card from duplication and cloning. Each transaction generates a unique code, making it impossible for thieves to replicate your data.
Transitioning from Swiping to 'Dipping'
Instead of swiping your card, you'll now insert it into a machine—a process some retailers refer to as 'dipping.' Once inserted, keep your card in the terminal until the transaction concludes. Some EMV cards also support NFC technology, allowing you to tap your card for payment.
The adoption of EMV technology will be gradual, so you can still use your EMV card at retailers that haven't updated their terminals and are still using the old swipe method.
Unfortunately, the full transition will take a while.
The major card networks—Visa, Discover, MasterCard, and American Express—have mandated that banks and retailers adopt the new technology by October 1st. Failure to comply will result in the retailers or issuing banks being responsible for any fraudulent transactions.
This deadline is flexible, so don't be concerned if you haven't received a new card yet. The transition is occurring gradually, and experts anticipate it may take several years before we exclusively use chip cards instead of swiping. MasterCard product expert Carolyn Balfany told the Tech Times she expects about 65 percent of cards to be equipped with chips by the end of 2015, with half of merchants upgraded. According to Creditcards.com, debit cards will roll out at a slower pace. Experts expect that 96 percent of debit cards will switch to this technology by 2017.
If you already have a chip card and have recently visited retailers like Target or Costco, you've likely used this new technology. It's straightforward to use, so adapting to 'dipping' instead of swiping shouldn't take long. It's a minor adjustment for enhanced security.
Illustration by Tina Mailhot-Roberge.
