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Are You Ready for Black Friday, Cyber Monday and New Credit Cards With Chips?

 

Are You Ready for Black Friday, Cyber Monday and New Credit Cards With Chips?

If you are like many holiday shoppers, Black Friday and Cyber Monday may be when you buy. According to the National Retail Federation, U.S. Black Friday retail sales for 2013 totaled $57 billion, down from $59 billion in 2012. For 2013, this averaged to $407 per person in spending. U.S. Cyber Monday sales for 2013 came in at $1.7 billion, but reflected an 18 percent increase from the previous year and marked another data point in a five-year stretch of double-digit increases. The Virginia Society of Certified Public Accountants (VSCPA) offers the following information on technology and precautions to keep you secure during the holiday shopping season.

Credit and debit cards are major means of payment for both of these retail events, but what about security? There is cause for worry as during the 2013 holiday season, Target had more than 40 million credit card numbers stolen through malware that was put on its point-of-sale terminals.

In the late 1950s, when the first modern bank credit card was popularized the major security risk was simply the card could be lost or stolen and used by someone else. But during that era, credit cards were used primarily for large purchases and not as a substitute for cash, and there was certainly no online shopping. Now credit and debit cards are used much more regularly and for small expenditures, so there is more opportunity for cards to be lost or stolen. The typical U.S. credit or debit card has a magnetic stripe which contains confidential card holder information, so all a thief needs is to obtain the card and he or she can make unauthorized purchases, either in person or online. In theory, the authentication would involve the merchant checking the signature on the back of card with the signature of the party who possessed the card for large purchases, but many merchants do not do so.  

But there is another way in which credit/debit card fraud can occur — counterfeit cards. For example, a waiter at a restaurant may have a skimmer to enter the card, which captures the card number, allowing for a magnetic stripe card to easily be manufactured off-site.

The cost of credit and debit card fraud can be difficult to estimate, but Business Insider Intelligence estimated that for 2013, global card fraud cost $14 billion, including $7.1 billion in the United States. But the U.S. cost grew 29 percent in 2013, compared to non-U.S. growth of 11 percent.

Technology exists that will make your Black Friday shopping more secure in the near future. Known as EMV (short for Europay, MasterCard, Visa), “Chip and PIN” or “Chip and Signature,” this type of card increases security through an embedded microchip that encodes information differently for each transactions. Some websites describe attempting to circumvent this technology as having on old key for a lock that has changed. The chip also makes the cards more difficult to counterfeit.

“Chip and PIN” cards require a password when making a purchase, much like withdrawing cash from an ATM. For the “Chip and Signature” cards, the signature authenticates the purchase. Obviously, the “Chip and PIN” is the most secure. By 2015, the majority of all credit cards in the United States will be “Chip and Signature” cards, so you may get one soon.

EMV technology has not been used in the United States because of the relatively low cost of fraud in the past, but just as criminals go from the most stringent security to the least stringent, U.S. credit card companies are seeing its impact. There will be a cost to U.S. merchants to upgrade terminals, and it costs about four times more to manufacture a card with a chip, but it may be worth it if fraud can be controlled as it is in other countries. The real impetus for merchants to invest in new terminals is that beginning in 2015, U.S. credit-card companies will charge merchants for fraud that comes from magnetic stripe cards. Chip cards will still have magnetic stripes to support those merchants who do not migrate to new terminals.

There are several excellent websites that rate EMV cards, if you travel internationally, you should review those websites so as to get cards that provide the most benefits. 

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