Credit card technology is in a never-ending race to stay ahead of criminals intent on racking up fraudulent charges on your account. The simple magnetic swipe that worked for many years is rapidly giving way to chip-and-PIN technology but even that technology has weak points. Point-of-sale transactions are beginning to accept alternate technologies to traditional credit cards, such as contactless payments using near-field communication (Apple Pay, for example). Will the chip card become obsolete before it becomes dominant?
Don’t count out card insertion technology just yet. MasterCard plans to introduce a variation of the chip-carrying credit card that uses fingerprint identification to produce secure point-of-sale transactions. The card is currently in a trial phase in South Africa, but MasterCard intends to expand testing to Asian and European markets within a few months, targeting a worldwide rollout by the end of 2017.
Here’s how it works: Your fingerprint pattern is encrypted and stored on the card’s EMV chip using a fingerprint reader embedded in the opposite end of the card. When you insert your card into a chip reader to initiate a transaction, you place your finger over the fingerprint reader portion of the card (which stays outside the merchant’s chip reader). The chip validates your identity by matching your fingerprint to the stored pattern, allowing the transaction to proceed. The change is simple for merchants, since those that already have a chip reader do not have to invest in a separate fingerprint reader.
Theoretically, this biometric card improves security over chip-and-PIN because a thief may have managed to get your PIN as well as your card and a fingerprint card is certainly more secure than a chip card that requires only a signature.
Fingerprint reading devices are not infallible, as they have been breached in several inventive ways on phones but thieves are not likely to take the effort to fool point-of-sale transactions this way. They are far more likely just to use your card for online transactions. Online transactions bypass the fingerprint process entirely, using other identifying information that may have already been stolen along with your card information (such as passwords and security questions).
How can fraudulent online use be prevented? There is a relatively creative approach being tested in several French financial institutions. The "Motion Code" technology contains a simple display embedded in the card’s signature strip that changes the three-digit security code each hour. Your breached credit card number would be useless to online thieves, since the rotating security code would be virtually impossible for any thief to guess.
The downside of the Motion Code: a thief that has stolen your physical credit card can use it at will. It also remains to be seen whether the display will remain functional and readable over the life of a credit card, and since the display requires power, whether there will be any battery issues.
In short, there is no 100%-safe credit card technology. However, most theft takes place through simple means. If you engage in higher risk practices like using simple passwords, not protecting your PIN and identifying/personal information, and transmitting your information over unsecured wireless systems, your chances of credit card fraud are greatly increased.
Take reasonable steps to protect your physical cards and all information associated with those cards, and take advantage of all protection services that your card issuer provides (such as fraud alerts and notifications of unusual account activity). Check your account activity regularly for any false charges, even small ones thieves may place them before launching a larger-scale attack on your account, just to see if you are paying attention. Make it difficult to access and use your card information, and fraudsters are more likely to move on to less challenging targets.
Check your credit report periodically to make sure that no fraudulent accounts have been opened in your name. You can check your credit report and your credit score for free within minutes using Credit Manager by MoneyTips.
If new credit card and payment technology still makes you nervous, consider the words of Adam Carroll, Founder and Chief Education Officer of National Financial Educators, "Cash is still king, particularly for those that aren’t disciplined enough to keep their spending at a minimum." Those funny green rectangles still work in most places, and exclusive use of them may prevent you from racking up excessive debt.
If you want more credit, check out MoneyTips’ list of credit card offers. If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, check out our credit monitoring service.
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