What you need to know about chip card security & digital wallets - WSFA.com Montgomery Alabama news.


What you need to know about chip card security & digital wallets

(Source: WSFA 12 News) (Source: WSFA 12 News)
(Source: WSFA 12 News) (Source: WSFA 12 News)
(Source: WSFA 12 News) (Source: WSFA 12 News)
(Source: WSFA 12 News) (Source: WSFA 12 News)
(Source: WSFA 12 News) (Source: WSFA 12 News)

If you’ve used the chip in your debit card to check out at a store, you may notice it takes a few extra seconds to process the transaction. It’s definitely worth the wait. The technology happening inside the machine is helping shield you from hackers.

“The EMV chip cards are essentially a new, added layer of security for credit and debit cards here in the US," explained Jessica Pigg, AVP of Retail Marketing for MAX Credit Union. "It has been in effect in Europe for many years but here in the US it is very much in its infancy.” 

“That chip card actually adds that protection through some different authentication steps when you’re making your transaction,” she added.

The chip-card technology is called EMV, named after its backers Europay, Mastercard, and Visa.

It works differently than the magnetic strip on the back of your card. When you swipe the card using the strip, all of the information is static, meaning it never changes. Your card information goes into the payment terminal and into that merchant’s computer system.

The difference with the EMV chip card, is that each time you put it in the terminal, it creates a unique authentication code. Your card number never goes in the machine and it never goes into the store’s computer system.

“So if someone were to have a skimming device on that payment terminal, for example, even that code that they get off of it is useless for any further transactions. It is a one-time use code on the EMV chip card,” Pigg explained.

In 2016 the U.S. saw billions of dollars stolen by criminals duplicating the information on the standard magnetic strip found on the back of every card, but the chips rolled out by banks and financial institutions in 2015 are helping cut down on some of that.

Mastercard and Visa changed their policy on who's financially responsible if an account is hacked. If fraud happens to a person using the new chip card at a store that doesn't have a chip reader, the business is now responsible.

Merchants who are not accepting the chip cards are taking an added layer of liability for potential credit/debit card fraud, Pigg said.

“If I have my EMV chip card and I go to a merchant and they have chosen not to accept the EMV chip cards due to the expense to update their terminal, for example, if my card was compromised because I swiped it rather than inserted it, they would carry the liability for that, not me as the consumer and not the card issuer,” she added.

Montgomery resident Ed Bertarelli dealt with the hassle of having his credit and debit cards replaced after strange things suddenly showed up on both accounts.

“Two different, big financial institutions, back to back,” he said. On his credit card, small purchases popped up from Washington D.C.

“They run a very low amount. They started with a charge for 49 cents, and then they increased in size.” he recalled. 

It was the next day when Bertarelli did his daily scan of his checking account and found unexplained charges on his debit card.

“The first charge was for $2.93. It was in Pennsylvania. Then a charge went through in Santa Fe, New Mexico. Of course it was not me. They’re very elaborate in what they do, whoever they are, wherever they are," he said.

Bertarelli canceled the compromised cards, both of which had security chips in them. He posted what happened to his Facebook page and was surprised to see how many comments were left by his friends who also dealt with similar problems.

“It’s scary. It’s very scary,” he stated. “I’m fortunate in that I caught it in the very beginning and I know there’s people that don’t catch it for days and they get hit for hundreds, if not thousands of dollars. I was lucky and mine was under a hundred bucks. I still have to go through the process and file a dispute but it could have been much worse.”

Bertarelli touted the fraud departments at both of his financial institutions for addressing the problems quickly. He’s now keeping a close eye on his accounts and credit report and recommends setting alerts from your bank for any suspicious activity or charges on your accounts.

“If they’re doing this to thousands of people, they’re raking it in and then they’re gone,” he said. “There’s still so many merchants out there that still use the swipe instead of the chip. Even if you swipe the card, you still stand the risk of being compromised. I can tell you there’s a lot of people locally that still swipe.”

Experts say you shouldn’t swipe if you don’t have to, but just having the chip embedded in your card doesn’t help you unless you insert it into the payment terminal. And you should keep in mind that chips don’t protect you when you’re shopping online where you’re only entering your card number.

Also, you’re not protected at many gas pumps, where the upgrade to chip card readers has been delayed. That’s why skimming continues to be an issue.

Emily Nichols, Consumer Protection Specialist for the Alabama Attorney General’s Office, says the chips are an extra measure that are an effective shield against fraud when it comes to credit and debit cards.

“The place where they are effective and they matter is when the consumer is physically swiping or inserting a card into a point of sale machine,” she explained. “We really shouldn’t be swiping it many places at all apart from the gas pump. I would not recommend that consumers swipe their credit or debit card if they have another choice.”

Nichols also stressed that the magnetic stripe on the back of the card contains data that never changes about that card and about your account that’s attached to that card. The data was added to that stripe when the card was created. The data stored on the chip changes for every single transaction.

"It’s very effective for skimming devices, for example, because what a skimming device is intended to do is obtain that card information from the magnetic stripe and duplicate that card. It creates fake cards, counterfeit cards that they can use your data to ring up charges or go to an ATM to withdraw money. The chips prevent the counterfeit cards from being usable,” Nichols said.

She added that having a credit or debit card with a chip doesn’t do anything to stop other types of crimes, like application fraud. Scammers will use your personal information to apply for accounts and fill out credit applications or open lines of credit.

“It will not prevent someone from using account information to make purchases online or some other digital format,” she added.

According to experts, digital wallets like Apple, Android, and Samsung Pay, provide some extra security online, at the gas station and at stores. 

“I think the digital wallets are a great option right now. They use a technology called tokenization, meaning they don’t store your actual sensitive card information. They’ll issue unique codes for that transaction like the chips do, but they don’t store your sensitive data in a way that it can be seen by a hacker,” Nichols said.

Pigg also says digital wallets are a great alternative to EMV chip cards.

“It’s still providing the security, the privacy and the ease of payment but it’s a little quicker than using the chip card. On the merchant’s side, for example with online payments, if I use Apple pay through an online payment platform or an app for a merchant, their liability is actually going down on that online side as well. It’s a great benefit. It’s super easy and secure for the consumer,” she said.

For the digital wallets, you load your card information into your smart phone. It’s very similar to the EMV chip card in that each time that payment is made through the digital wallet, a unique code is created for that transaction.

Your card number never goes to the terminal or the merchant’s system.

“Apple, for example, never receives that card number. It’s a specific code for that one-time transaction,” Pigg added.

You simply place your phone near the terminal and it uses your thumbprint to process the payment.

“There’s more merchants accepting digital wallets than we realize. A lot of them are larger national brands but more and more are adding it every day,” Pigg stated. “Some of them here locally that I’ve used are Kohl’s, Subway, Best Buy, Chevron, Pet Smart so some of the places you’re frequenting each week are accepting it.”

Consumer protection officials say it’s important to be proactive when protecting yourself against identity theft. Be mindful of documents, like bills, that may have any of your personal information on them and shred them. You should also keep a close eye on your credit report. Credit monitoring programs are also available that offer alerts for any possible fraud or compromised data.

Since many stations don’t offer chip card technology at the pumps, Pigg suggests considering other alternatives.

“For example, Chevron is a gas station that's accepting digital wallets so although the gas pump isn’t accepting the EMV chip card technology, there are gas pumps through certain companies that are taking digital wallets which will help add that extra layer of security,” she said.

While she thinks the technology is still very much in its infancy for both EMV chip cards and digital wallets, she feels it’s rapidly improving.

“It’s something that the merchants are really taking to in order to protect themselves from the liability of fraud with credit and debit cards. From the consumer side, it’s an added layer of security. You feel that added bit of protection and for the most part, it’s very simple and easy to use these payment options,” she added. 


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