Credit Cards

Chip Cards Off To A Slow Start

December 19, 2015 By Twila Van Leer

The deadline has passed, but as of a few weeks ago, fewer than half of America’s credit and debit cardholders had received a new card containing the chip that is supposed to help combat card fraud, according to Cardbeat research.

And of those whose card issuer has presented them a card with the new technology, many have never actually use it as intended, the research showed. The survey was conducted by Auriemma Consulting Group, who surveyed some 400 adult cardholders to gather the data.

The chips, which are being pushed by Europapy, MasterCard and Visa (EMV), showed that at the time of the survey (in June) about 47 percent of the respondents had at least one chip credit card and about 25 percent had a debit card containing the chip.

Add to this problem the dearth of merchants who have the new equipment required to read the enhanced cards and you have a very slow start to a process that was ballyhooed as a major step toward thwarting fraud in stores. A USA Today report said that a mere 27 percent of all the merchants who are expected to use the technology had acquired the equipment to put it into practice. Small businessmen, in particular, have complained at the cost of readers, although some models sell for about $100. For large retailers, of course, the cost escalates, but they have the capacity to pay more.

The effort took on more steam during September as an Oct. 1 deadline approached that shifts the liability for fraud to the seller instead of the institution that issued the card.

Those consumers who are using their new chipped cards complain that the technology increases checkout time at the store. Those who issue the cards say that a certain amount of experience is necessary to make the changes in habit that will ensure the program’s success. Until more merchants have the equipment to read the new cards, that experience will be spotty, they say.

In the meanwhile, as the transition moves ahead, merchants say their new readers will continue to process the magnetic strip cards that are in current use.

Most people who get a new card (67 percent in the Auriemma survey) are aware that the blossoming technology will make it harder for unauthorized users to counterfeit a chip card than one with a magnetic strip. Huge breaches of card security in some of the country’s major companies in the past few years provided much of the impetus for new technology.

Internal mistakes will remain a problem, according to an Experian publication. Training for clerks who are in charge of customer transactions is another component in the whole move to chip technology. And the curve for customer education must be speeded up to make it work. Many customers still prefer to swipe their card rather than hand it over to be read by a chip reader, even though the magnetic stripe reading is more vulnerable. The reluctance on the part of customers may be more understandable in view of reports that 35 percent of them using a chipped card have difficultly in making their transaction. The process takes longer, they complain, and many are not aware that the card has to stay in the reader until the transaction is complete. If they remove it prematurely, they have to start the process over again.

The upcoming Christmas shopping season is likely to be the true trial of the chip card technology. Education on all sides of the issue is the answer, but if the ultimate outcome of the switch is a decrease in the multi-billion dollar fraud that occurs at the checkout line, the problems associated with the transition will all be worthwhile.

Plastiq: Pay Tuition, Rent, or Taxes With Credit Card at 1.5% Fee, Debit Card at 0% Fee

Millennials Benefit By Owning A Few Credit Cards

December 14, 2015 By Twila Van Leer

Who would ever guess that being without credit cards could be a problem? Too many people know the stress of having to make the payments that credit cards require, but not having any cards can create difficulties of another kind. Borrowing in the future may be hampered if you haven’t built a history of bill-paying.

The millennials who are now in their working years tend to take on fewer credit cards than did their older peers. But when you apply for a loan, for a car or house, say, the potential creditor will be looking for evidence that they can expect you will pay regularly and on time.

Avoid becoming part of the “credit invisible” group by looking ahead and planning when and how to use a credit card. Before 2009, when Congress passed the Credit Card Act, college students were sent offers from banks and other financial institutions for credit cards, usually with a glut of “goodies” to sweeten the deal. Under the act, persons under 21 must have a co-signer or be able to prove income to obtain a card.

The provisions had a dampening effect on applications for cards by young people. NerdWallet did a survey that determined 31 percent of those in the 19-34 age bracket had never applied for a card. Millennials, too, have been deluged with horror stories of the results of uncontrolled debt and may be more wary of taking on cards than those who preceded them. Those born at the turn of the century were becoming job-eligible after a serious recession had turned the country’s economy topsy-turvy. The increasing costs of student loans also have had an effect on the overall financial thinking of the millennials.

But the reality comes home to roost when credit is a sensible part of personal finances. Not being able to get loans – or even to set up a cellphone plan – brings the role of credit into stark reality. Sometimes, even a large down payment on a big-ticket item may not offset the creditor’s inability to verify a customer’s credit standing.

Delaying too long also may complicate your ability to obtain a card when you want one. A disproportionate number of those in the millennial age group were denied credit cards on their first application, according to Fair Isaac Corp. research. Because they haven’t built a credit record, they end up with low scores, the average being 628 – not enough to impress the card issuers. Banks often require a good to excellent rating to issue a card. Being denied a card multiplies the problems, as the denial becomes part of the credit rating.

Being persuaded to apply for a card because of the flashy perks such as cash-back rewards, airline miles, etc., may look good at first glance, but the institutions that offer such incentives often charge more interest, or even an annual fee. Don’t jump too fast.

Piggy-backing, or adding your name to the card owned by a parent or other relative may be an option. But be certain that the individual has a good credit rating, or it may ultimately affect your own rating. Likewise, you are more likely to have your feet held to the fire so that your lapses in payment don’t affect the card owner’s credit.

A secured card may be the answer for your first-time foray into credit. These cards require money in a security deposit account as collateral. Income and ability to pay also must be proved. This type of card helps to build a credit history that may lead to other cards after time. Prepaid cards do not build a credit record, simply tapping into deposited funds.

Consider the options and go for the one that fits your needs. But some sort of credit card will ultimately work to your benefit as you get into the serious business of life as an adult.

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Liability Shift In Credit Card Fraud

February 25, 2015 By Twila Van Leer

Smart-card-based credit card payment systems improve security. — About half the world’s credit card fraud happens in America. This new processing terminal uses technology that reads the latest EMV chip embedded credit card.

Due to massive losses that have occurred through large-scale credit card data breaches, there will be a change in credit card liability. Beginning on October 1, 2015, a shift in liability places the responsibility for fraudulent credit card charges on the merchant and/or banks that don’t use new technology to accommodate chip-based credit cards. The changes, the first major alterations in decades, will make credit card fraud more difficult.

The traditional magnetic strip credit cards now in wide use will be replaced with cards that have embedded chips and PINS. Fraudsters will find themselves stymied as more users turn to these cards, dubbed EMV cards, an abbreviated form of Europay, MasterCard and Visa.

The Losers

The losers will be the merchants who are not EMV ready and banks who don’t issue cards with the new technology. Historically, card issuers have eaten the loss due to counterfeit cards. Now the responsibility will shift to the merchant who processed the card without the new technology or the bank that issued the card without EMV technology. Magnetic card swipes are easily counterfeited, and now account for billions of dollars in fraud losses every year – an estimated 7 billion in the United States alone.

Start Dates

On Oct.1, when the rules change, merchants who have not installed EMV terminals will be burdened with the costs of fraudulent transactions, but those who offer EMV protected services will be off the hook. When the new technology was developed, the card networks decided that improving point of sale devices and the design of the credit card itself would be the best way to go.

It will take time for the new technology to settle in. Experts estimate that by the Oct. 1 start date about 35 percent of merchants will have the technology to process EMV sales. And only 15 percent to 25 percent of cards issued will have the chips to facilitate the secure purchases. By the end of the year, the expectations are that 70 percent of credit cards, 41 percent of debit cards and 59 percent of terminals will be ready for the new technology.

Big Retailers Comply

Predictably, the largest merchants are gearing up to lead the parade. They and others are trying to stay ahead of the curve in being prepared for the change. Widely publicized security breaches such as the devastating Target fiasco are impetus for the merchants to make themselves – and their customers – more secure. The cost of installing the new equipment is about $200 per terminal.

New Industry Created By EMV Needs

Those who produce and install the equipment are being hard-pressed to meet demand. Small merchants are at the tail-end of the parade toward EMV technology, and the demand is so great there are many competitors ahead of them.

What Banks Issue EMV Credit Cards?

Among the card issuers, large banks also are better poised to make the change, with regional banks less ready to distribute EMV-enabled cards to customers. There is no huge supply of EMV chips, and these institutions may see a lag in catching up with the technology, so they may face greater fraud losses. American Express, Bank of America, Chase, Citi and Wells Fargo banks all issue cards with the new chip technology.

Europe is ahead of the United States in implementation of EMV-protected card transactions, with experience going back to 2005. Since then, online sales have increased significantly. The experts expect the same jump in the U.S.

Looking Forwards

The shift in liability will open new doors for mobile payment processing in 2015. New technologies that process payments through mobile phones may lead to some steep learning curves by consumers, retailers and banks, but chances are the learning will be worth it in the long run.