Tags: credit | card | theft | Target

Businessweek: US Is 'World Capital of Credit Card Fraud'

Tuesday, 24 Dec 2013 06:56 AM

By John Morgan

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Americans are more exposed to credit card fraud than citizens of other countries are because card issuers are reluctant to spend the money to upgrade the nation's outmoded magnetic stripe technology, Businessweek reported.

The hacking and theft of credit information from 40 million Target customer accounts recently merely underscore the problem behind the reliance on magnetic stripes.

"Most other countries abandoned this technology long ago. They've switched to cards with embedded chips that generate a new code for every transaction, making cards very difficult to counterfeit," Businessweek said.

Editor’s Note:
Opinion: Retirees to Be Hit With Social Security Cuts

The embedded chip cards have gained widespread use in many other countries, in part because telecom charges that the magnetic stripe technology relies on were so high there.

"As the rest of the world adopted the new technology, the U.S. became the world capital of credit card fraud," the newsmagazine noted.

In 2012, the United States accounted for 47 percent of global credit card fraud even though it processed just 24 percent of payments by volume, according to industry estimates.

In order to solve the problem and ditch the antiquated technology, more than 8 million American merchants would need to upgrade the terminals they use to accept payments, Businessweek explained.

The Nilson Report, an industry newsletter, said it costs about four times as much to make a card with embedded chips as it does to make a magnetic stripe card.

In the fall of 2015, credit card companies are scheduled to force merchants to start accepting embedded chip cards, but there is skepticism the magnetic stripe cards will disappear from widespread use.

The credit card industry downplayed the Target theft. "This is a very rare occurrence," Jason Oxman, CEO of the Electronic Transactions Association, told Businessweek. "If a consumer's credit card information is compromised and someone makes a counterfeit magnetic stripe, they have no liability."

The stolen Target credit and debit cards are already on sale in underground black markets for as little as $20 each, Fox News reported.

Target said it is still investigating how the attack was carried out, according to Reuters, but experts suspect that systems at cash registers were compromised.

Editor’s Note: Opinion: Retirees to Be Hit With Social Security Cuts

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