With the recent credit card breaches at large retailers like Target and Neiman Marcus, credit card security is on everyone’s mind. However, you don’t have to resign yourself to credit card fraud as a given because new chip security credit card features are headed to U.S. by the end of 2015.
Also known as chip and PIN, chip and signature, EMV, smart cards, or just chip cards, this technology is standard overseas where it has cut credit card fraud significantly. With the extremely high rate of fraud that is so prevalent in the U.S., this much anticipated technology is finally making its way to our shores.
So that you can better understand what to expect during this transition, we’ll walk you through some of the chip security basics.
What’s wrong with the credit card I have now?
Currently, most U.S. credit cards are designed to store data on a magnetic strip, and then require your signature for confirmation of your identity. While this process is fairly secure, it’s none too difficult to copy the data from the magnetic strip and forge a signature. The U.S. is one of the last remaining holdouts on this swipe-and-sign system, which is a big reason why America is home to almost half of the world’s credit card fraud.
The solution to fraud is developing more secure credit cards. With a chip card, there’s a microchip embedded in the card, which makes it much more difficult for a thief to counterfeit.
Chip and Signature versus Chip and PIN cards:
Chip cards can be chip and signature, chip and PIN, or a combination of both.
Some merchants may request a signature, while some merchants may request that you enter a PIN at the time of purchase. For example, purchasing a train ticket at an unattended electronic kiosk will require the use of a PIN, whereas at other merchant locations, a signature may be required for verification.
PenFed chip enabled credit cards are a smart choice because they include both signature and PIN verification.
How come the U.S. is not already using chip and PIN technology?
Switching to chip technology is a sizable expense for financial institutions who issue the cards as well as the merchants who process the cards. Chip cards are more expensive to produce than the traditional magnetic strip card. In addition, merchants will need to invest in chip compatible card readers at the point of sale.
The cost has left businesses dragging their feet, but with increasing rates of credit card fraud, chip cards are starting to look a lot more appealing.
Visa and MasterCard are aiming for nationwide adoption of chip cards by October 2015; after which point liability for fraudulent transactions will fall upon the financial institutions or the retailers who have not updated their systems to be compatible with new chip cards.
How do I get a chip credit card?
Depending on your financial institution, you may not need to do anything at all. In fact, you may already have a chip card.
PenFed for example, already issues chip cards for the benefit of their members. If you do not already have a chip card, or you are not sure what kind of card you have, you’ll want to check with your financial institution to find out when they will be making the transition, and what you need to do to get a new card if you need one.
Will there be any other big changes?
When chip cards become common in the U.S., you won’t see many differences in how you use your card. For point of sale transactions, you will insert your card into a chip reader to make a purchase. Then, based on preferences between the issuer and the merchant, you may be asked to sign for the transaction or enter your PIN to verify your purchase.
PenFed currently offers chip technology on the following select VISA® credit cards:
- PenFed Platinum Rewards Visa Signature® Card
- PenFed Promise Visa® Card
- PenFed Platinum Cash Rewards Visa® Card
- PenFed Gold Visa® Card
What are the advantages to carrying a PenFed chip enabled credit card?
- The PenFed chip credit card allows cardholders to make purchases at international chip enabled merchants where chip cards are the standard form of payment.
- Provides a higher degree of security against fraudulent transactions, because chip cards are difficult to copy and counterfeit.
- Still contains a magnetic stripe, which allows cardholders to make purchases in the U.S. where chip readers are less common.