Scam of the day – September 23, 2015 – New survey on EMV chip credit cards

As the October 1st deadline approaches for retailers to switch over to using the new EMV credit cards containing a computer chip that creates and encrypts a new number every time the card is used,  a recent poll taken by ACI Wordwide indicates that 59% of American consumers have not yet received a new chip enabled credit card from their credit card companies and only 32% of those people receiving the cards were even aware that the United States was changing to the EMV cards and a large majority of the people receiving the cards did not know that the reason for the switch over is due to the massive data breaches suffered by companies such as Target, resulting in tremendous amounts of credit card fraud through the use by identity thieves of the numbers of the stolen credit cards with the old style magnetic strip.  Unlike credit cards in other parts of the world, American credit cards still mostly use magnetic strip technology that has been around since the 1960s in which information is contained on a magnetic strip on the back of the card.  When the information on this strip is stolen, the identity thief has access to the credit of the victim.  However in more than 80 other countries around the world, the magnetic strip card technology has been replaced with cards embedded with a microchip.  This technology is often referred to as EMV which stands for Europay, MasterCard and Visa, the originators of the card.  With EMV cards, the chip creates and encrypts a new number every time the card is used.  Thus hacking into the data terminals used by the cardholder is a worthless exercise in trying to access the credit card.  Credit card companies and retailers have resisted for cost reasons updating the credit card system in the United States although changes in regulations in regard to liability for fraudulent credit card use will prompt credit card companies and retailers to switch to this technology by October 1, 2015.   Under these new rules, after October 1st if a retailer does not switch its card processing machines over to EMV card processing of sales, in the event of a data breach, the retailer will be held financially responsible for any losses incurred.  Previously, in the event of data breaches, it has generally been the credit card issuing banks that have been held responsible for such credit card fraud.

The October 1st deadline, however, is unlikely to be met by many credit card issuers and retailers.  More than a billion credit and debit cards will have to be switched to the new EMV cards and only 120 million people have already received a new EMV card.  That number is expected to reach 600 million by the end of 2015.  Meanwhile, many retailers have not yet converted their card processing devices to accept the new EMV cards.  Since under the new regulation regarding liability in the event of credit card fraud, the liability passes to the party that is the least EMV compliant, there is much incentive for the credit card companies to issue new EMV cards and for retailers to convert their credit card processing equipment as soon as possible.

TIPS

Some American companies including Target and WalMart have been among the leaders in switching over to EMV processing.  Among the credit card issuing banks, Bank of America and Chase have been active in switching to the new EMV cards.  If you do not have one yet, you should contact your credit card issuer and request that a new EMV card be sent to you.  They are easy to use and can save you a lot of headaches.  EMV cards are not a panacea.  They will do nothing to stop credit card fraud in online purchases, but they will improve the security of credit card use in brick and mortar stores dramatically.

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