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What EMV means for card security

By Jeanine Skowronski · Bankrate.com
Wednesday, June 4, 2014
Posted: 10 pm ET

EMV chip cards are trending.

Sam's Club introduced a new rewards credit card Wednesday that features the security technology. Walmart, its parent company, will also upgrade to chip-enabled MasterCards sometime later this year. The move follows Target's decision to add chip-and-PIN technology to its store-branded cards in early 2015.

It's certainly tempting to correlate these changes to the massive data breach Target experienced in December. However, the retailers' decisions -- and the similar ones that are likely to follow -- are more likely related to the fact that, effective October 2015, the major networks will shift fraud liability from the card issuer to whichever party (the issuer or the merchant) is sporting the less secure tech.

"It's a trend, but it's an anticipated trend," says Jason Oxman, CEO of the Electronics Transactions Association. "This timeline (for EMV adoption) has been in place for a couple of years."

Sam's Club is offering EMV cards

Sam's Club is offering EMV cards.

What does this mean for my security?

EMV technology will certainly make payments less susceptible to fraud, since, unlike traditional magnetic stripe cards, the chip's security code changes with every purchase and is much more difficult to counterfeit.

However, most EMV cards in the U.S. "will have mag stripes on them for a number of years," Oxman says, as merchants upgrade to chip readers. As such, if and when you use this magnetic stripe to make a purchase, the card will still be  vulnerable to counterfeiting.

The new technology also won't preclude you from ever being affected by a data breach. For instance, "if Target had EMV capabilities, it wouldn't have helped at all," says Nick Holland, senior analyst of retail payments for Javelin Strategy and Research, since hackers obtained information by infiltrating a company database via stolen network credentials.

This method of infiltration gave them access not just to cardholders' account numbers, but to the types of personal information -- including names, addresses and phone numbers -- that make a consumer more susceptible to identity theft.

The next steps

Fortunately, Holland says, the move to EMV "is part of a systematic upgrade of payment security." Companies are currently working on other initiatives, including tokenization, which swaps out card credentials for a meaningless string of alphanumeric characters, and biometrics, which, like EMV, could make getting access to information more difficult for hackers.

"If you remove the bait, there's no reason to go after it," Holland says.

Still, you should take steps to protect yourself should card fraud or a data breach occur. This includes using unique and more sophisticated passwords across online accounts, monitoring bank statements and signing up for alerts to spot fraud as soon as it occurs.

You should also call your issuer to have a stolen, lost or compromised card replaced as soon as possible to minimize the hassle of disputing unauthorized charges.

Follow me on Twitter: @JeanineSko.

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