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Chip-and-PIN cards, by contrast, make counterfeits or skimming impossible because the information that gets scanned is encrypted. The historical reason the U.S. has stuck with magstripe, ironically enough, is once superior technology. Our cheap, ultra-reliable wired networks made credit-card authentication over the phone frictionless. In France, card companies created EMV in part because the telephone monopoly was so maddeningly inefficient and expensive. The workaround allowed transactions to be verified locally and securely.
Some big banks, like Wells Fargo, are now offering to convert your magstripe card to a chip-and-PIN model. (It's actually a hybrid that will still have a magstripe, since most U.S. merchants don't have EMV terminals.) Should you take them up on it? If you travel internationally, the answer is yes.
Keep in mind, too, that credit cards typically have better liability protection than debit cards. If someone uses your credit card fraudulently, it's the issuer or merchant, not you, that takes the hit. Debit cards have different liability limits depending on the bank and the events surrounding any fraud. "If it's available, the logical thing is to get a chip-and-PIN card from your bank," says Eric Adamowsky, a co-founder of CreditCardInsider.com "I would use credit cards over debit cards because of liability issues." Cash still works pretty well too.
Retailers and banks stand to benefit from the lower fraud levels of chip-and-PIN cards but have been reluctant for years to invest in the new infrastructure needed for the technology, especially if consumers don't have access to it. It's a chicken-and-egg problem: no one wants to spend the money on upgraded point-of-sale systems that can read the chip cards if shoppers aren't carrying them--yet there's little point in consumers' carrying the fancy plastic if stores aren't equipped to use them. (An earlier effort by Target to move to chip and PIN never gained traction.) According to Gumbley, there's a "you-first mentality. The logjam has to be broken."
JPMorgan Chase CEO Jamie Dimon recently made overtures to do so, noting that banks and merchants have spent the past decade suing each other over interchange fees--the percentage of the transaction price they keep--rather than deal with the growing hacking problem. Chase offers a chip-enabled card under its own brand and several others for travel-related companies such as British Airways and Ritz-Carlton.
The Target and Neiman hacks have also changed the cost calculus: although retailers have balked at spending the $6.75 billion that Capgemini consultants estimate it will take to convert all their registers to be chip-and-PIN-compatible, the potential liability they now face is exponentially greater. Target has been hit with class actions from hacked consumers. "It's the ultimate nightmare," a retail executive from a well-known chain admitted to TIME.
The card-payment companies MasterCard and Visa are pushing hard for change. The two firms have warned all parties in the transaction chain--merchant, network, bank--that if they don't become EMV-compliant by October 2015, the party that is least compliant will bear the fraud risk.