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June 02, 2011

  • News:  U.S. Card Theft On The Rise 

    A recent survey conducted by Consumer Reports showed that over the past five years more than 30 percent of the United States debit and credit cardholders have been a victim of fraud. Over reliance on out-dated security systems by credit card issuers is considered by some expects as the greatest contributor. According to the report, a technology gap exists between the systems used by foreign countries versus those used with debit and credit card companies in the U.S., which makes U.S. cards more vulnerable to theft. American card issuers use plastic cards with a magnetic strip that stores the unencrypted card information.

    Magnetic strips enable thieves to use skimming devices to easily steal the credit card information which they in turn use to manufacture multiple counterfeit cards. The report also indicates that thieves prefer to steal debit card information that allows them withdraw cash from automatic teller machines (ATM) rather than taking a chance at getting caught trying to shop with the stolen credit card. Many U.S. merchants support chip and PIN technology and have pushed for national adoption of the system. Some stores including Best Buy, Home Depot and Wal-mart have begun installing new terminals to accommodate the chip and PIN technology.

    On the other hand, "chip and PIN" credit cards have been embraced by many foreign countries throughout Europe. These types of cards have the cardís information encrypted and embedded on a micro chip inside plastic making it inaccessible to skimming devices. With chip and PIN technology, during the transaction a unique one-time PIN is generated that requires the cardholder enter prior to final approval. The code is usually sent via text message to the cardholder which would help to eliminate a "card not present" (CNP) fraudulent transaction.

    If chip and PIN technology has proven to be successful in fighting credit card fraud, why donít U.S. card issuers make the switch? It is believed card issuers donít believe the cost of converting to the higher technology will benefit the costs since they absorb the total cost of card fraud. Merchants, on the other hand, say that card companies pass the cost onto them. As the industry continues to battle over the cost of embracing chip and PIN technology, cardholders should continue to take extra precautions to protect their card data.

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