Updated on December 10, 2021
The United States has lagged behind other countries for years on secure credit cards, with the magnetic-stripe-based cards used here inherently insecure. Credit card security finally came to a head with last year’s Target credit card breach. This has finally prompted a move by credit card issuers to start issuing chip-based cards, similar to what Europe, Canada, and other countries have used for years.
The financial industry’s set a deadline of October 1, 2015 for merchants to accept chip-based cards, or else be on the hook for any credit card security liabilities. Ideally, merchants should have new point-of-sale terminals by then to begin accepting the new chip-based cards; however, it’s clear there’ll be a transition period for all merchants to get on board, as well as all banks, credit unions, etc. to issue new cards. Computerworld notes it’ll take until 80%-90% of merchants have switched to the newer terminals before magnetic-stripe card readers can be deactivated. The transition period is expected to be over the next three to four years. Thus, the new chipped cards for the time being will continue to carry a magnetic stripe along with the chip.
A survey in the Computerworld article claims as of August, 54% of Americans still haven’t received a new chip based card. I can confirm I’m in the majority—my credit and debit cards are still magnetic-stripe ones. However, they’re both due to expire in the next few years, and thus should be replaced with chip-based cards, assuming my bank doesn’t take action pre-emptively.
There’s also the concern that the majority of the new cards being issued aren’t “chip-and-pin,” i.e., requiring a PIN to be entered (like for existing ATM/debit cards) as how it works elsewhere in the world. Instead, they’re “chip-and-signature,” i.e., users still sign their names after inserting the card. The supposed excuse for breaking with the international standard? Card issuers fear users might not be able to remember their PINs; this despite that we already remember our PIN for ATMs. This has raised concern that the new cards won’t be as secure as they could be, plus a pointless deviation from an already established international standard. (One more thing to add to the “American exceptionalism” list, I suppose.) They’ll still be more secure than the current cards, however.
In my opinion, the real test of these new cards won’t be October 1, but November and December—the holiday shopping season. It’ll also be a test of the new smartphone-based payment systems introduced earlier this year.
Have you received the new chipped cards yet? Any thoughts on the new system?