It’s time for more secure credit cards

January 28, 2014 

Kudos to South Carolina banks that voluntarily issued new debit and credit cards to all their customers as a result of the massive Target data breach during the Christmas shopping season.

But that’s not the definitive answer to the problem of vulnerable credit cards.

Target officials estimate that as many as 70 million customers – up from original estimates of 40 million – might have had their personal information stolen by foreign hackers. Target estimates that nearly 500,000 cards in the Palmetto State might have been affected.

Stolen data includes customer names, credit and debit card numbers, card expiration dates, PINs and the three-digit security code printed on the back of the cards. In short, the hackers stole everything that allegedly protects consumers from credit-card fraud.

In light of that, South Carolina banks decided they had little choice but to re-issue cards to their customers whatever the expense. That expense, by the way, could be $50 per card.

While customers may welcome a new card, it will be an inconvenience for many of them. After receiving the new card, consumers must activate it and make sure there are no outstanding charges on their old cards.

Also, if they use their cards to automatically pay monthly bills of any kind, they must notify the affected companies or organizations about the new card. That is a big hassle if a number of bills are involved.

Worst of all, though, this fix works only until the new card is hacked or stolen. And, as the Target data breach demonstrated, the possibility of that happening is very real.

What really is needed is safer, more secure credit cards. And, fortunately, they already exist in the form of credit and debit cards embedded with so-called smart chips.

Unfortunately, they are far rarer in the United States than in Europe, where they are in widespread use. With cards embedded with chips, cardholders usually must enter a PIN or sign their names after each transaction.

That might not be as easy as simply swiping a card, but it makes stealing information much more difficult for hackers.

Most U.S. cards simply use the familiar magnetic strips. In many cases, transactions don’t even require a signature.

Card issuers have balked at routinely offering card embedded with chips because they cost more. But after a few incidents like the Target hacking, banks might consider the added security of cards with smart chips to be worth the cost.

When South Carolina banks are paying $50 apiece to replace cards for their customers, cards with chip technology might have been a bargain.

The good news is that demand by savvy consumers has prompted card issuers to begin offering some cards with chips in them. So, if you need a new credit card, consider looking for one with chips.

And the rest of us should consider asking our card issuers if we can replace our magnetic strip cards with new ones that have smart chips embedded in them.

But until banks and other card issuers bite the bullet and adopt the more secure cards as the standard, customers will be stuck with riskier cards.

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