Microchips set to take over US credit cards this year

101701799-85145561.530x298
American shoppers, adept at swiping the stripe, soon will learn to dip the chip in stores across the land.We’re talking about high-tech cards with microchips inside to make plastic money more secure. Chip cards are everywhere overseas and finally emerging here in response to massive credit card data breaches, such as the one at Target in 2013.

Expect to find chip cards in your wallet by year-end as card issuers roll them out. Chip cards have a small gold or silver rectangle on the front of the card just above the first four digits of the card’s number. It’s not the hologram of a dove found on many stripe cards.

Shoppers shouldn’t slide a chip card through the machine at checkout lines. They should insert the card into a slot and let it sit.

“When you put it in there, it kind of clicks. You can feel it,” said Bobbie Kuhns, who used her chip card recently at a Wal-Mart grocery.

More of us would be dipping chip cards already if this seemingly simple change weren’t so disruptive, and it certainly creates potential pitfalls, such as leaving your card behind. Experts, however, say retraining consumers will be worth it.

Chip cards are nearly impossible to counterfeit, even with stolen account information, in contrast to normal credit cards.

“America got a big wake-up call with Target, and everybody in the industry is very keen on fixing this problem,” said Carl Bradbury, director of consumer cards at Commerce Bank.

Big-store chains are leading the retail industry toward chip cards. As of Nov. 1 last year, every register at all 46,000 U.S. Wal-Mart and Sam’s Club stores accepted chip credit cards, and every Wal-Mart and Sam’s Club brand credit card has a chip in it.

Target has set the goal of having chips in all its Target-branded RED cards this year.

Crooks have pretty much figured out the old credit cards, and they’re creating financial mayhem. A report from the Federal Reserve Bank of Kansas City last fall put the total for credit and debit card fraud at $3.8 billion.

Stripe cards are vulnerable because every time you swipe one, it gives up key information. Hackers have found many ways to intercept or steal this information. Microchips, on the other hand, make credit cards virtually impossible to counterfeit.

Merchants will want chip readers come October. That’s when a new rule imposed by Visa and MasterCard hits.

Visa has declared that banks that fail to get chips into customers’ cards by Oct. 1 will be on the hook for fraudulent transactions that involve using a counterfeit stripe card.

Similarly, merchants who let customers swipe the stripe of a chip card after Oct. 1 will be stuck for those transactions that turn out to be frauds.

If a chip card is lost or stolen, a second security measure can render it useless. Overseas, consumers who dip the chip confirm the charge by entering a four-digit number called a personal identification number, or PIN. A lost or stolen card becomes useless without it.

Few American-issued cards, however, are set to deploy this step. “We’re just not taking advantage of the technology given to us,” said John MacAllister, a semi-retired consultant to the payments industry.

 

Leave a Reply