The U.S. Department of Justice says that the number of identity theft victims jumped from 16.6 million in 2012 to more than 70 million in 2013.
Smart Chip credit cards are a much more secure system than the magnetic strip cards now used in the U.S.
What Are Smart Cards?
A Smart Card is a credit card that has an embedded microchip instead of a magnetic strip.
The microchip is actually a microprocessor which can contain up to 8 kilobytes of RAM.
The data on the magnetic strips on credit cards now used in most of the U.S. can easily be read and copied with equipment that just about anyone can buy online.
The information in the Smart Card microchip is encrypted, so it can’t be copied. The card information can’t be read by “swiping”. The data doesn’t get decrypted until it gets to the processor.
The microchip can even generate a new code for each transaction.
In some cases the terminal or processor will require a PIN to decrypt the information, which provides even more security.
The microchip is a fingernail size gold box, usually above the card numbers.
Chip based Smart Cards have been used in more than 80 countries for at least a decade. In Europe they are used for banking as well as insurance. About 80% of credit cards in Europe are said to have the microchips.
However, the United States has lagged behind in switching to Smart Cards. That is why the hackers, ATM Skimmers, and other thieves love to attack U.S. stores and banks.
The countries that use Smart Cards have seen a dramatic decrease in fraud.
The main reason the switchover hasn’t happened in the U.S. is money. Just the new terminals required for Smart Cards can cost many hundreds of dollars, and the total cost of changing to the new technology has been estimated at between $15 to $30 billion dollars.
The actual cards with microchips are also more expensive to make.
The credit card companies have basically said that credit card fraud only costs about .05% of their revenue (less than one percent), and the upgrade to Smart Cards will cost them much more than that.
But this isn’t taking into consideration the aggravation and frustration of all the consumers who’ve had their identity stolen!
However, Mastercard (and possibly other card companies) has reportedly stated that they will start shifting over to Smart Cards around October of 2015.