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What Security Do Credit Cards Offer?

By: Chris Nickson - Updated: 27 Feb 2016 | comments*Discuss
 
Credit Card Chip And Pin Security Code

Credit cards can be a boon, letting you buy something and offering a grace period before you need to pay it off in full, or giving you the option of paying over time for your purchases. But just how secure are those cards in your wallet?

The truth is, credit cards will never be perfectly secure. There are measures in place to help ensure no one uses your card without your specific authorisation. The problem is they're not always as effective as they're claimed to be.

Security Codes And Credit Cards

If you look on the back of your credit card, you'll see a series of numbers printed on the signature strip. The last three of these are your security code (on an American Express card, it's four digits on the front). The security code is only printed on the card - you won't find it in the magnetic strip information and you'll never spot it on any sales receipt or on your statement - the idea is that, in order to use it, the card must be physically in your possession.

In theory this means that anyone who wants your details for a "card not present" fraud would have to write down your security code. Online retailers who require your security code as part of your transaction are forbidden from storing it.

Are Chip And PIN Credit Cards Secure?

The chip and PIN system fully came into effect in Britain in 2006. There's now a special chip in each credit card, which along with the customer's four-digit PIN number, is meant to make cards more secure. Each chip and PIN credit card contains a special number, called a "cryptographic key", which it uses in electronic communications. To an extent, the technology has improved security. According to reports, early versions of chip and PIN reduced counterfeit and fraud crimes by nearly £60m in 2005 over 2004.

However, there are downsides. You now need to remember the PIN numbers for each one of your cards (don't, under any circumstances, use the same PIN number for then all).

You should also be aware that, since the banks deem PIN numbers to be secure, it can be a lot harder to prove that your credit card has been used fraudulently. These days, the onus is on you to prove that you didn't make the transaction.

The chip and PIN machines themselves are supposed to be tamper-resistant, but that's been proved false. In May 2006, the machines at several Shell petrol stations were hacked into and over £1 million siphoned from cardholders' accounts. Many security problems (experts say there's a 20% chance that a terminal won't spot a "cloned" card, for example) are being blamed on the issuing banks - according to some, they chose the cheapest version of the new chip and PIN cards. Criminals can reportedly clone the new credit cards quite easily using equipment they can buy over the Internet for just £300 or £400.

Overseas, where a different system only reads the magnetic strip and ignores the smart chip, it's easy to use cloned cards. One bank's customer had £3,000 taken from an account through a number of withdrawals in the Netherlands.

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My business was affected by the credit crunch and I was made bankrupt in 2011. In 2014 I claimed PPI and during a dispute with their credit management department, a bank manager was very abusive to me and the bank upheld a complaint aginst him. In 2015 the same department passed a debt covered under bankruptcy todebt collection agency. The bank and debt collection agency were informed of their mistake and a bank telephone representative assured me the mistake ould be dealt with. It was removed from one debt collection agency and passed to another. From the moment of bakruptcy, I had been carefully rebuilding my credit score, which was destroyed when this illeagal debt was passed to a collection agency. I contacted the bank and new collection agency, informing them again of their mistake. The bank sent me a letter accepting liability for the mistake and a cheque for £150 compensation, which I thought was an insult after them destroying my credit score. Two weeks after the cheque was issued the debt collection agency is still hounding me despite being told of the mistake and my credit score is in tatters. What do you advise ?
showsyer - 27-Feb-16 @ 3:00 PM
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