U.S. Credit Cards Tackle Fraud With Embedded Chips, But No PINs
To protect against fraud, U.S. banks will be issuing credit cards with small computer chips. But some experts say using a PIN to complete a transaction is more secure than a signature. iStockphoto hide caption
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To protect against fraud, U.S. banks will be issuing credit cards with small computer chips. But some experts say using a PIN to complete a transaction is more secure than a signature.
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This year, there will be an important change in the way Americans use their credit cards. More banks will be issuing cards with small computer chips, a move they say will protect against credit card fraud.
But banks are stopping short of another step that will make credit card usage even safer. And a lot of retailers aren't too happy about it.
Americans use their credit cards a lot, and most of the cards they use operate the same way. The credit card is swiped through a machine, and the machine reads the customer's personal information, which is stored in a magnetic strip on the back.
The problem, says Kevin Yuann of the Website NerdWallet, is that this magnetic strip is really easy for criminals to access.
"The Target breach, for example, or the Home Depot breach, someone skimmed all that card data and then printed out fraudulent cards," Yuann says.
Now U.S. credit card companies are moving to cards encoded with small chips, which have long been used overseas. Yuann says fraud will become a lot harder to pull off.
"That type of fraud won't be able to occur because the chip prevents someone from emulating a card that way," he says.
The U.S. has been slow to accept chip-encoded cards until now because most retailers didn't have the machines that could read them, and they didn't want to pay for them. But later this year, retailers that don't accept cards with chips will be responsible for any fraud that occurs as a result.
So the retail industry invested billions of dollars to buy the new technology. But Mallory Duncan of the National Retail Federation says the new cards won't be as safe as they could be. He blames the big banks.
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"It's really disappointing to see that after all of the hacks that have occurred, the banks are only willing to take the steps to protect the banks and not the full protection we need," Duncan says.
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As anyone who's traveled to Europe lately knows, using a credit card overseas usually requires entering a PIN just like you do with your bank card in the U.S. But the U.S. banks that issue credit cards didn't want to ask their customers to do that. So customers will just be required to provide their signature, which is the way they do now for the most part.
"Most credit card users in the United States, in fact the vast, vast majority of them, are not accustomed to using a PIN within a credit environment, so I think that that's something that was central to the decision of the credit card issuers," says Doug Johnson, a senior vice president of payments and cybersecurity policy for the American Bankers Association.
In essence, U.S. consumers aren't used to punching in a PIN when they buy something with their credit cards. Yuann says credit card companies did marketing studies and found out that requiring PINs would actually turn off U.S. customers.
"The banks want to make sure that cardholders use their card, and so they want to make it as easy for the cardholder," Yuann says. "And so until they see adoption of PIN across the system, no bank wants to be the only one with a PIN-only-enabled credit card."
But requiring PINs would make credit cards even safer — a lot safer, in fact. Bank industry officials brush aside this concern, saying this is all a temporary problem.
There's a new generation of credit cards coming that won't use numbers at all, not even account numbers. Until then, they say the new chip-encoded cards will provide an extra level of security, even if they don't go as far as a lot of retailers would like.
FAQs
U.S. Credit Cards Tackle Fraud With Embedded Chips, But No PINs. To protect against fraud, U.S. banks will be issuing credit cards with small computer chips. But some experts say using a PIN to complete a transaction is more secure than a signature.
Why do US credit cards not have PINs? ›
In the U.S., however, credit card issuers are reluctant to require their customers to use PINs. The issuers are worried people would find the PINs to be a hassle and would opt to use a competitor's card that didn't require remembering and entering a number.
Do credit cards with chips need a PIN? ›
Chip-and-PIN cards require the cardholder to enter a PIN that presumably only they know in order to complete a transaction. An alternative type of card, the chip-and-signature card, requires a signature but not a PIN and is considered less secure.
Has chip and pin reduced fraud? ›
As well as making payments easier and more convenient, chip and PIN also helps to reduce fraud. Thanks to its introduction, annual counterfeit card losses dropped from £129.7 million to £47.8 million between 2004 and 2014.
Does America not use chip and pin? ›
While the USA has started to roll out a chip-and-PIN system across the country, it is not yet used by all stores. Most commonly, the insert-and-sign method is used, so you should be prepared to insert your card and then sign the printed slip given to you by the store.
Why don't the US use chips and PINs? ›
Basically: the form of fraud it protects against is very rare in the US, and consumers find memorizing another number painful. Europe adopted chip+PIN not because anyone really wanted it but because it was mandated by law. It's unclear that it has actually been effective.
Do US bank credit cards have PINs? ›
Yes, all U.S. Bank credit cards are chip and PIN enabled. If you haven't received the PIN with your card, you can request it by calling the phone number on the back of your card or at (800) 285-8585. The chip and PIN technology provides an added level of security and is widely accepted internationally.
Can you use a credit card without a PIN? ›
A credit card PIN is a four-digit code that you may need to use to make certain credit card transactions. Most of the time, you will not need a PIN to use your credit card unless you're making a cash advance or traveling abroad. You should never write your PIN down anywhere or share it with anyone.
How are chip credit cards still vulnerable? ›
Chip cards are less vulnerable to skimming than magnetic stripe cards, but they aren't completely safe. Crooks can still capture your card information from a chip card using a technique called shimming. Shimming allows criminals to create fake credit cards with your card information.
Do US credit cards need a PIN in Europe? ›
When Europeans buy something with plastic, they insert their card, then type in their PIN. Despite some differences between European and US cards, there's little to worry about. US-issued Visa and Mastercard credit cards, along with familiar payment apps, typically work fine in Europe.
Benefits of Contactless Credit Cards
In comparison, tapping to pay using a contactless chip can take only seconds. Contactless payments are much faster than inserting a credit card and safer than paying with cash or by means of magnetic stripe swipe.
Can skimmers read tap to pay? ›
Does "tap to pay" prevent your card from being skimmed? Payment terminals with contactless technology that let you “tap to pay” prevent your card from being skimmed with a traditional card skimming device. However, scammers never seem to run out of new ways to steal your card data, so you should always stay vigilant.
Do US credit cards require a PIN? ›
While a handful of credit card issuers offer chip-and-PIN transactions in the U.S., they're far from common. If offered by your issuer, it might not hurt to request a credit card PIN, though.
Why are credit cards not popular in Europe? ›
If you're bound for Europe, be warned: your foreign credit card won't always work. Thanks to technological advances, tax evasion, and merchants' disgust with fees, you may find that credit cards in Europe are not nearly as welcome as other payment methods.
Is chip and pin safer than contactless? ›
Contactless payments are secure. You enjoy the same 100% fraud protection on contactless payments as your normal Chip & PIN transactions. For security purposes, you'll occasionally be asked to enter your PIN when making a contactless payment.
Does a US credit card require a PIN? ›
There are very few banks in the US issuing chip & PIN credit cards. Almost all US bank issued credit cards are chip & signature. If a chip & signature card is issued with a PIN, the PIN is only needed for ATM cash withdrawals, something you really would not want to do.
Why I never made a PIN for my credit card? ›
Contact your issuer: You can also contact your credit card company to ask about your PIN. You may also request a new PIN from their customer service if you don't remember your PIN or never had one before. Your credit card company will typically mail your PIN to the address you have on file.
Do bank of America credit cards have PINs? ›
Your PIN must be 4 digits (some foreign ATMs do not accept PINs longer than 4 digits). To request or update your credit card PIN: Log in to Online Banking. You may also request your PIN using our Mobile Banking app or by calling the number on the back of your card.
