Credit card security

Here’s another thing the rest of the world does better than we do.

The United States is the only developed country still hanging on to credit and debit cards with those black magnetic stripes, the kind you swipe through retail terminals.

The rest of the industrialized world has switched -or is in the process of switching- to “smart” chip-based cards.

The problem with that black magnetic stripe on the back of your credit card is that it’s about as secure as writing your account information on a postcard: everything is in the clear and can be copied. Card fraud, and the measures taken to prevent it, costs U.S. merchants, banks and consumers billions.

The smart cards can’t be copied, which reduces fraud. Smart cards with built-in chips are the equivalent of a safe: they can hide information so it can only be unlocked with the right key. Because the key information is hidden, the cards can’t be replicated.

But the stripes have been so entrenched in the vast U.S. payment system that banks, payment processors and retailers have failed to reach consensus on how to revamp it, leaving the U.S. behind the rest of the world.

“The card system in this country has been dysfunctional for a long time,” says Mallory Duncan, general counsel of the National Retail Federation. “We have far, far too much fraud because we have a very antiquated payment system relative to the rest of the world. This is something they should have fixed a long time ago.”

Changes are coming, and the smart cards will be much more prevalent in the next few years. In the meantime, if you’re traveling overseas, you may want to check and see what your options are, because your dumb card may not be accepted everywhere over there. I don’t have a point to make about this, I just had no idea this was the case and figured many other Americans don’t either. Did you?

Related Posts:

This entry was posted in Bidness and tagged , . Bookmark the permalink.

2 Responses to Credit card security

  1. Peter Wang says:

    Yes, I’ve almost had card acceptance problems in Europe and Malaysia, the retailers asked if I had a chip card, but in the end they took my magnetic card. But I did recently receive a chip card from Chase Bank, it’s their “Slate” branded card. So if you use Chase credit cards, and if you ask for it, you might be able to get one too. But I did buy an Alumawallet to keep it in.

  2. Ross says:

    The smart chips in credit cards can only be read by a contact reader, they aren’t proximity cards. The risk of fraud is greatly reduced when chip and PIN are required. The rules change to where any use of the card with the PIN is the responsibility of the car holder. These are much better than the stripe cards.

Comments are closed.