IRMA Head: US Issued ‘Chip’ Credit Cards Don’t Go Far Enough
Many U.S. banks are now issuing new credit cards with a chip in them, in advance of an October first 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 and CEO Rob Karr said the cards still have the old magnetic stripe, which are vulnerable to fraud. He said banks are looking to shift their liability to merchants with the new cards, even though not all banks have issued cards.
Karr questions why the U.S. 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," he said. "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.”
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 said card fraud in the United Kingdom dropped by nearly 70 percent after banks and merchants there started using ‘Chip and PIN’ cards in 2003.
According to Karr, there should be no slowdown in terms of convenience in the U.S., having used his own 'chip and sign' card recently.