U.S. Credit Cards Tackle Fraud With Embedded Chips, But No PINs
To protect against fraud, U.S. banks will be issuing credit cards with small computer chips. But some experts say using a PIN to complete a transaction is more secure than a signature. iStockphoto hide caption
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To protect against fraud, U.S. banks will be issuing credit cards with small computer chips. But some experts say using a PIN to complete a transaction is more secure than a signature.
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This year, there will be an important change in the way Americans use their credit cards. More banks will be issuing cards with small computer chips, a move they say will protect against credit card fraud.
But banks are stopping short of another step that will make credit card usage even safer. And a lot of retailers aren't too happy about it.
Americans use their credit cards a lot, and most of the cards they use operate the same way. The credit card is swiped through a machine, and the machine reads the customer's personal information, which is stored in a magnetic strip on the back.
The problem, says Kevin Yuann of the Website NerdWallet, is that this magnetic strip is really easy for criminals to access.
"The Target breach, for example, or the Home Depot breach, someone skimmed all that card data and then printed out fraudulent cards," Yuann says.
Now U.S. credit card companies are moving to cards encoded with small chips, which have long been used overseas. Yuann says fraud will become a lot harder to pull off.
"That type of fraud won't be able to occur because the chip prevents someone from emulating a card that way," he says.
The U.S. has been slow to accept chip-encoded cards until now because most retailers didn't have the machines that could read them, and they didn't want to pay for them. But later this year, retailers that don't accept cards with chips will be responsible for any fraud that occurs as a result.
So the retail industry invested billions of dollars to buy the new technology. But Mallory Duncan of the National Retail Federation says the new cards won't be as safe as they could be. He blames the big banks.
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"It's really disappointing to see that after all of the hacks that have occurred, the banks are only willing to take the steps to protect the banks and not the full protection we need," Duncan says.
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As anyone who's traveled to Europe lately knows, using a credit card overseas usually requires entering a PIN just like you do with your bank card in the U.S. But the U.S. banks that issue credit cards didn't want to ask their customers to do that. So customers will just be required to provide their signature, which is the way they do now for the most part.
"Most credit card users in the United States, in fact the vast, vast majority of them, are not accustomed to using a PIN within a credit environment, so I think that that's something that was central to the decision of the credit card issuers," says Doug Johnson, a senior vice president of payments and cybersecurity policy for the American Bankers Association.
In essence, U.S. consumers aren't used to punching in a PIN when they buy something with their credit cards. Yuann says credit card companies did marketing studies and found out that requiring PINs would actually turn off U.S. customers.
"The banks want to make sure that cardholders use their card, and so they want to make it as easy for the cardholder," Yuann says. "And so until they see adoption of PIN across the system, no bank wants to be the only one with a PIN-only-enabled credit card."
But requiring PINs would make credit cards even safer — a lot safer, in fact. Bank industry officials brush aside this concern, saying this is all a temporary problem.
There's a new generation of credit cards coming that won't use numbers at all, not even account numbers. Until then, they say the new chip-encoded cards will provide an extra level of security, even if they don't go as far as a lot of retailers would like.
FAQs
So, Chip and PIN cards were introduced to combat these issues to enhance security and reduce card payment fraud. In fact, during the first few years of Chip and PIN payments, there was a reduction in card payment fraud, with annual counterfeit card fraud losses down £81.9 million.
Why do US credit cards not have PINs? ›
In the U.S., however, credit card issuers are reluctant to require their customers to use PINs. The issuers are worried people would find the PINs to be a hassle and would opt to use a competitor's card that didn't require remembering and entering a number.
Do credit cards with chips need a PIN? ›
Chip-and-PIN cards require the cardholder to enter a PIN that presumably only they know in order to complete a transaction. An alternative type of card, the chip-and-signature card, requires a signature but not a PIN and is considered less secure.
What is a credit card fraud with a PIN number? ›
Skimming occurs when devices illegally installed on ATMs, point-of-sale (POS) terminals, or fuel pumps capture data or record cardholders' PINs. Criminals use the data to create fake debit or credit cards and then steal from victims' accounts.
How can a Chip-and-PIN override fraud? ›
The criminal might also be able to bypass other security features, for example they could override the checking of the PIN by following the steps the retailer would if the customer has forgotten the PIN. By the time the terminal is passed back to the retailer, it looks like the transaction was completed successfully.
Can skimmers read tap to pay? ›
Does "tap to pay" prevent your card from being skimmed? Payment terminals with contactless technology that let you “tap to pay” prevent your card from being skimmed with a traditional card skimming device. However, scammers never seem to run out of new ways to steal your card data, so you should always stay vigilant.
Are there credit cards with no PIN? ›
All credit cards have PIN functionality; when you were approved for the card, the credit card issuer sent you your new card and your PIN in the cardmember packet. However, you may not know your PIN; for most transactions, it isn't necessary to have one.
Can a credit card have no PIN? ›
Can you use a credit card without a PIN? Using your credit card doesn't usually require you to enter a PIN. Everyday purchases in stores and online usually have several credit card payment options: entering the card information, swiping the magnetic stripe, making a contactless payment and inserting the card's chip.
Do US bank credit cards have PINs? ›
Yes, all U.S. Bank credit cards are chip and PIN enabled.
How are chip credit cards still vulnerable? ›
Chip cards are less vulnerable to skimming than magnetic stripe cards, but they aren't completely safe. Crooks can still capture your card information from a chip card using a technique called shimming. Shimming allows criminals to create fake credit cards with your card information.
The smart chip is not a locator system, so the physical location of a credit or debit card cannot be tracked. Also known as an EMV chip, this smart chip embedded on your card creates dynamic data for every transaction, which makes it less likely for criminals to steal or clone your information.
Do US credit cards need a PIN in Europe? ›
When Europeans buy something with plastic, they insert their card, then type in their PIN. Despite some differences between European and US cards, there's little to worry about. US-issued Visa and Mastercard credit cards, along with familiar payment apps, typically work fine in Europe.
Do police do anything about credit card fraud? ›
The police can then investigate the matter and potentially file felony charges against the culprit. If the thief is found and convicted, the judge can order that the thief pay victim restitution; or. Filing a civil lawsuit. The victim can sue the thief for theft and fraud.
Do police catch credit card fraud? ›
Credit card companies and merchants frequently update the security measures they use to prevent credit card fraud, and their investigators will check into issues as they occur. Law enforcement also may get involved, depending on the type of fraud and the amount.
How often do credit card frauds get caught? ›
Some estimates say less than 1% of credit card fraud is actually caught, while others say it could be higher but is impossible to know. The truth is that most credit card fraud does go undetected, which is a major reason why it's become a favorite among crime rings and fraudsters.
Do chip readers prevent fraud? ›
EMV is designed to prevent fraud.
EMV cards are primarily designed to prevent fraudulent transactions that take place when someone physically swipes a counterfeit card at a payment terminal. And chip card technology works.
Has credit card fraud decreased? ›
Card fraud losses across the world increased by more than 10 percent between 2020 and 2021, the largest increase since 2018. It was estimated that merchants and card acquirers lost more than 30 billion U.S. dollars, with - so the source adds - roughly 12 billion U.S. dollar coming from the United States alone.
Is credit card fraud decreasing? ›
While reports of identity theft and credit card fraud have dropped, they remained above pre-pandemic levels over the course of 2023. After doubling between 2019 and 2020, reports of identity theft continued to grow in 2021, and nearly 1.4 million people were impacted.
How does a chip card prevent fraud? ›
Chip cards are considered safe because they generate a different token for each transaction. While information skimmed from magnetic strip cards doesn't change from transaction to transaction, the nature of chip tokens prevents fraudsters from using your information for future payments or activity.
