The new “Chip-and-Signature” cards aren’t really that safe!

Like probably most of you, I’ve got the new credit cards from most of my credit card issuers. Those with a large square chip on the left side. The new “Chip-and-Signature” cards.

The US banks are going out of their way to explain why these cards are safer than the old magnetic-stripe-only versions. But they don’t really tell you exactly why they are in fact safer. Let me tell you why: because they’re much harder to be forged. Magnetic stripe cards were so easy to forge, literally anyone could duplicate a credit card. With the chip – its much harder.

However, this doesn’t make the card safe. This makes the account safe, since the cards accessing the account cannot be forged. It can only be accessed with the card you have.

But what if you no longer have it? Forgery is not the only security problem with credit cards. Lost/stolen cards are quite a concern for many.

If your chip card is lost or stolen, and being used without your knowledge – there’s nothing really you can do. It is no safer than the good old magnetic stripe card. Anyone can use it. They’ll sign, the merchants won’t check (or check, but it will look similar), and that’s it. In automatic machines – the thieves won’t even need to sign.

No added safety or security at all. The only thing the chip promises is that the card used was indeed the same physical card issued. That’s it.

It doesn’t have to be that way.

In the rest of the world, there’s an additional layer of protection on top of the actual chip: a PIN. A Personal Identifying Number, that only you would know. If such a card is stolen – the thief cannot use it, since they wouldn’t know the PIN. It would just be a piece of plastic for them, completely useless. The vendors don’t need to worry about signatures, and the automated machines won’t charge these cards – because the thief won’t be able to authenticate. This is similar to the way we all use ATM/debit cards. Except that your account is not charged right away, the charge goes the same way the credit card charges had always gone.

So why don’t the US banks allow the standard Chip-And-Pin mode of operation for these cards?

Probably because they think the American consumers are stupid. Look at all the related advertisements and publications: the banks are emphasizing exactly the point of lack of security. The fact that you still need to sign, instead of using the PIN – is actually the main selling point. The main disadvantage of these cards – is what they’re advertising the most. Why? Because in their twisted minds, you using your card the same way as you used to is more important than keeping you and your account safe. They’d rather pay more on fraud and chargebacks, than try to explain to you, the consumer, why you need to use a PIN with your credit card. And who do you think will end up paying for these chargebacks and fraud transactions? You, of course, the consumer. Because the banks think you’re stupid.

Tell your bank you’re not an idiot. Insist on a Chip-and-Pin card.

There are some banks that do provide chip-and-pin cards in the US. Do your homework and shop around.

Your Little Advisor.

This entry was posted in Banking, Smart Credit, Smart Shopping and tagged , . Bookmark the permalink.

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