Many US banks are now issuing new credit cards with a chip in them, in advance of an October 1st soft deadline for retailers to get the new payment system in place. But the head of the Illinois Retail Merchants Association says the ‘chip and sign’ cards are a half-step forward at best.
A computer chip embedded in the credit cards develops a new code for each transaction. IRMA president Rob Karr says the cards still have the old magnetic stripe, which are vulnerable to fraud. He questions why the US is the only G-20 nation that hasn’t offered ‘chip and pin’ cards… that also require a PIN number for every transaction:
“I think people are used to putting in pins. You know, we do it for ATM cards. We do it for security codes for our cell phones. We do it at our homes – we do it for a garage entrance. Everyone’s used to remembering numbers. So the banks argue that they don’t want to have to have customers learning another pin. But I think customers are up to that.” -Rob Karr, President of the Illinois Retail Merchants Association
Karr notes the new cards cost slightly more to make… a few dollars compared to about 50 cents for a traditional credit card. But he says card fraud in the United Kingdom dropped by nearly 70 percent after banks and merchants there started using ‘Chip and PIN’ cards in 2003.