Credit Card Hacking: 10 Things You Should Know About Smart Cards

The United States likes to think of itself as a technology leader yet has not adopted smarts cards as a replacement for magnetic strip credit cards. Smart cards are easy to identify because of the small electronic chip found on each card. The U.S. has fallen behind in this area and is using old technology. Americans deserve better! The loss of personal information and credit card data has been too great. If this is not reason enough for the U.S. to consider upgrading its credit card infrastructure, consider the following:

  • Magnetic credit cards are an old technology – It’s not hard to find the equipment to steal the information encoded in your credit card.
  • Credit cards are easily cloned – It’s an easy process for hackers to clone most of the credit cards that are in your purse or wallet.
  • Skimmers are widely available – Anyone with basic search skills can find and buy this equipment.
  • Underground markets sell blank cards – Once a hacker has your credit card information, there are websites that sell blank or pre-embossed credit cards.
  • Many places in Europe do not accept them – Thinking about traveling to Europe? If so, you may be surprised to discover that many European retailers will not accept magnetic strip credit cards. These retailers accept “pin and chip” only.

Smart Cards - Pin and Chip Credit Cards

Europe has fully adopted smart cards. Smart cards started to become more popular in Europe in the 1990s. The ones used in Europe use the Europay, MasterCard, and Visa (EMV) standard. This standard is used to make sure that smart cards, point of sale (POS) terminals, and automated teller machines (ATMs) authenticate all credit and debit cards using these cards. Smart cards have been tremendously successful in preventing fraud worldwide and makes it much harder for hackers to clone smart credit cards. EMV cards have the ability to securely store information in the chip on the card to send and receive sensitive financial data in a secure manner. While the technology is not perfect, it is better than what we currently use in the U.S. With this in mind, why hasn’t the U.S. moved to this technology?

  • Smart cards cost more than magnetic strip cards – Smart cards are expensive. They can cost as much as five times the cost of a traditional credit card.
  • Smart cards require new technology – Remember replacing that old TV years ago and getting your first flat screen? Much the same is required here; for smart cards to be supported, retailers will need to buy new technology. This is not the kind of stuff retailers buy every day and in today’s tight economic market, no one is in the mood to spend money on infrastructure.
  • It is not just the retailers that will need an upgrade – For smart cards to truly work, consumers will need to replace the old plastic cards with new ones. Someone will need to pay for that, too!
  • No one likes change – Sure, you left MySpace and moved on to Facebook, but smart cards are foreign to many consumers and people don’t always easily embrace change.
  • Smart cards are not the only game in town. Smart cards are competing against digital wallet technologies which many industry insiders see as the next big thing. Picking the winner is much like placing bets on VHS or Betamax.

While smart cards do address some of the problems with credit cards, they are not perfect. Point of sale payment systems are still the Achilles’ heel of all credit card technologies. Whatever your view of smart cards may be, you will be seeing more of them in the future. New credit card standards that will be introduced in 2015 will begin to reshape how most customers pay for goods and services and smart cards will start to be mandated at that point.

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