Editorial: Don’t let cost drag credit card security
Why does the U.S. lag behind Europe in protecting its consumers from credit card fraud.
Money ... and a squabble over who should pay for the extra protection that’s already standard overseas.
According to one survey, nearly a third of American consumers have reported credit card fraud in the past five years.
But some of those thefts could have been avoided, say experts.
The sad fact is that U.S. card issuers continue to rely on security systems that are far behind current technology. The account information use by retailers to make transaction is stored, unencrypted, on a magnetic stripe on the back of each card.
Swiping the card transfers the information to the store.
But it can also be easily read by a thief and used to either produce a bogus card or to steal the card owner’s identity. Debit cards, which can be used to get cash from an ATM, are particularly vulnerable.
But European consumers have long used different, more advanced cards. Each card contains a microchip, which holds information that’s been encrypted. Advanced versions even change their ID code with each transaction. Many of the cards, called “chip and PIN cards,” also require a PIN number.
When the cards were introduced in France, card counterfeiting fell by 78 percent, according to published reports.
Why don’t American banks issue such cards? The bottom line is the cost.
They have argued that since losses due to fraud aren’t high enough to pay for the cost of the new technology, there’s no urgency in switching. Retailers respond that they are often left to swallow the loss.
Things are slowly changing. Walgreens, Kroger and Sears are pushing hard for the adoption of the more secure card technology and Best Buy, Home Depot and Wal-Mart are installing sales terminals that can process the smart-chip cards.
Bank of America is issuing cards with the new chips and some others are following suit.
In the meantime, we are seeing data thefts like the recent one at Target stores ... and the thieves are getting away with wholesale larceny.