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How credit cards are getting smarter with chips

(Business Finance) Credit cards and fraud have dominated headlines of late, so what is the industry doing to react and better guard against hackers?

credit cards

credit cards

Welcome to the 21st Century, America

After the recent Target incident, Americans are wondering if their credit cards are really safe any more. As it happens, Congress has been wondering the same thing. The technology most of us currently have is the magnetic strip type.

You just swipe your card and sign your name and you are finished. However, it is the least secure. The United States is the only major market on the planet to still use swipe and sign technology. And because we currently use this technology we account for half of the world’s daily total of credit card fraud. In light of this fact, the Senate Judiciary Committee has asked for increased security measures and the implementation of a new technology called EMV.

What is EMV?

EMV (Europay, MasterCard, and Visa) cards come in two varieties: chip and PIN, or chip and signature. Both include embedded microchips which make the card difficult to copy. Smart Chip cards securely store information and process data safely and efficiently. The chip and signature works like the magnetic cards we have now, but they are much more secure.

You will just insert the chip portion of the card into the point of sale terminal with the chip facing up, leaving it in until the transaction is complete, and follow the prompts providing your signature when/of requested. Chip and PIN cards function the same way, but will request you use a four-digit PIN to secure each transaction. If your PIN does not match, the transaction will not go through, making it more secure than even the chip and signature version.

Who’s already on board?

Both Chase and Bank of America have started introduces the Smart Chip cards. The government set a tentative deadline for October of 2015 for all changes to be fully implemented. However these changes will require converting or replacing existing terminals and ATMs, so that the new technology can be in place. However, it should result in a massive drop in fraud incidents, which is well worth the financial cost and hassle; just ask the 40 million customers who were affected by the Target incident.

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Jennifer Walpole is a Senior Staff Writer at The American Genius and holds a Master's degree in English from the University of Oklahoma. She is a science fiction fanatic and enjoys writing way more than she should. She dreams of being a screenwriter and seeing her work on the big screen in Hollywood one day.

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