Credit and Debit Card Ratings

U.S. Credit Card Security Outdated

Target has begun 2014 with a very bad hangover. As has been widely reported, as many as 40 million of the large retailer’s customers had financial and personal information stolen during the height of the holiday shopping season. The repercussions for Target have already been severe and seem only to get worse by the day. Besides seeing its all-important holiday shopping traffic decline, several states’ attorneys general are investigating Target and a number of class-action lawsuits have been filed against the company.

A recent story in The Los Angeles Times points out that backward technology long ago abandoned by much of the rest of the world may be more to blame for the data breach than anything Target did or didn’t do. The story by reporter Chris O’Brien says that while it’s still the norm for U.S. credit card holders to have plastic with a magnetic strip that holds their account information, most other countries have opted for so-called smart cards.

These smart cards earn that name, O’Brien writes, because they utilize embedded microchips to hold customer information rather than the magnetic strips that are found on 99 percent of all of the credit cards issued in the US. “The additional encryption on so-called smart cards has made the kind of brazen data thefts suffered by Target almost impossible to pull off in most other countries,” writes O’Brien.

Because around 80 countries have already embraced smart card technology, the more vulnerable U.S. has become the favorite target of identity thieves. Given that smart cards provide such superior security, the question is why the U.S. hasn’t embraced their use. According to O’Brien’s story, there has been no political pressure to force businesses and financial institutions to make the switch. Importantly, an upgrade to smart cards would be expensive.

Nevertheless, it does appear that the U.S. will soon become home to a lot more smart cards. According to O’Brien’s article, many credit card issuers have launched efforts to make the switch by October of 2015. To do that, credit card companies will change the rules about who is responsible whenever there are fraudulent purchases as a result of security breaches. “Under the new rules, the entity in the payment chain – merchant, credit card, banks – deemed to have the weakest security will be liable,” writes O’Brien. “Credit card companies can’t make anyone adopt the technology, but they’re giving them a hard nudge.”

Author: Chris Warren

  • U.S. Credit Card Security Outdated

    U.S. Credit Card Security Outdated

    Target has begun 2014 with a very bad hangover. As has been widely reported, as many as 40 million of the large retailer’s customers had financial and personal information stolen during the height of the holiday shopping season. The repercussions for Target have already been severe and seem only to get worse by the day. Besides seeing its all-important holiday shopping traffic decline, several states’ attorneys general are investigating Target and a number of class-action lawsuits have been filed against the company.

    A recent story in The Los Angeles Times points out that backward technology long ago abandoned by much of the rest of the world may be more to blame for the data breach than anything Target did or didn’t do. The story by reporter Chris O’Brien says that while it’s still the norm for U.S. credit card holders to have plastic with a magnetic strip that holds their account information, most other countries have opted for so-called smart cards.

    These smart cards earn that name, O’Brien writes, because they utilize embedded microchips to hold customer information rather than the magnetic strips that are found on 99 percent of all of the credit cards issued in the US. “The additional encryption on so-called smart cards has made the kind of brazen data thefts suffered by Target almost impossible to pull off in most other countries,” writes O’Brien.

    Because around 80 countries have already embraced smart card technology, the more vulnerable U.S. has become the favorite target of identity thieves. Given that smart cards provide such superior security, the question is why the U.S. hasn’t embraced their use. According to O’Brien’s story, there has been no political pressure to force businesses and financial institutions to make the switch. Importantly, an upgrade to smart cards would be expensive.

    Nevertheless, it does appear that the U.S. will soon become home to a lot more smart cards. According to O’Brien’s article, many credit card issuers have launched efforts to make the switch by October of 2015. To do that, credit card companies will change the rules about who is responsible whenever there are fraudulent purchases as a result of security breaches. “Under the new rules, the entity in the payment chain – merchant, credit card, banks – deemed to have the weakest security will be liable,” writes O’Brien. “Credit card companies can’t make anyone adopt the technology, but they’re giving them a hard nudge.”

  • Cybercriminals Hit Target

    Cybercriminals Hit Target

    The holidays just got a little more stressful for millions of Target customers. In a statement on Dec. 19, the large retailer acknowledged that as many as 40 million customers who used their debit or credit cards at Target’s U.S. stores between Nov. 27 and Dec. 15 might have had personal information stolen. Online shoppers at Target.com were not impacted.

    Target says that it discovered the problem on Dec. 15 and was able to take steps to resolve future problems. Target also said that the information stolen included customer names, credit or debit card numbers, card expiration dates and three-digit security codes.

    According to a report in The New York Times, criminals focused their attention on point-of-sale transactions taking place inside Target stores. “By breaching point-of-sale systems, they can steal the so-called track data on credit and debit cards, which can be sold, in bulk, on the black market and used to create counterfeit cards,” says the story by Times reporters Nicole Perlroth and Elizabeth Harris.

    This high-profile theft comes at a very bad time for both Target and its customers. The first day criminals accessed customer credit and debit card information was Nov. 27, the day before Thanksgiving and just prior to Black Friday, the traditional start of the holiday shopping season.

    In its statement alerting customers about what happened, Target said it had partnered with a third-party forensics company to investigate the security breach and had alerted financial institutions and law enforcement officials. The New York Times report said that the Secret Service, which is responsible for investigating financial fraud, had launched an investigation.

    Target also urged customers who may have been impacted by the theft to take a number of steps to protect themselves. Specifically, the company urged people to keep a close eye on credit and debit accounts in order to spot any fraudulent transactions. Target also suggested customers monitor free credit reports available from Equifax, Experian and TransUnion, the nation’s three major credit bureaus. “If you discover any suspicious or unusual activity on your accounts or suspect fraud, be sure to report it immediately to your financial institutions,” says the statement from Target.

    In the case that a customer does find irregular charges, Target suggests contacting law enforcement or the Federal Trade Commission (FTC) to report the incident.

Credit and Debit Card Ratings