The New Generation of Smart Credit Cards
You’ll be getting new credit cards soon.
And that’s great news because your new plastic will better protect you against theft and fraud.
Banks in the United States are currently in the process of replacing hundreds of millions of credit and debit cards with new smart cards that are safer.
You’re going to get chip-enabled cards that will replace your old ones that relied on magnetic strips, which is a 50-year-old technology.
New generation of cards
Each new smart card will have a metal chip embedded on the front. The chip assigns a unique code for every transaction made on an individual’s card. The chip technology is designed to prevent copying stolen cards. If a thief or hacker gets a new card or a card’s data, the stolen transaction number couldn’t be used again and the card would just get denied.
In contrast, traditional cards with magnetic strips contain information that doesn’t change. Consequently, crooks can use the card repeatedly. Information in the magnetic strip can be quickly copied onto counterfeit cards.
Instead of swiping your new card, you’ll insert the smart card into a machine with a slot like those that you use at an ATM. The new card will need to be kept in the machine for a few seconds to work.
Nearly half of all U.S. credit cards will be replaced by the end of the year. To pull off this technological advancement, tens of thousands of merchants must upgrade their equipment to facilitate chip transactions rather than the swipe-and-sign ones. News reports suggest that merchants are behind in installing their new equipment.
Retailers and banks hope the new cards will significantly reduce fraud, which has doubled in the past seven years as criminals have shied away from countries that have already embraced this advanced technology. The United States is the last major market still using the magnetic-strip cards.
According to the Nilson Report, a trade publication for the credit-card industry, the U.S. accounted for 47% of worldwide payment card fraud losses during a recent year but generated only 23.5% of the total volume.
The new technology will not eliminate credit card fraud entirely. You should still check your credit card accounts regularly.