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CHARLESTON, SC – Most likely you’re getting new credit cards in the mail. They are embedded with a chip that the banks say, will help stop credit card fraud. But a News 2 Investigation explains flaws with the chip switch.
Banks hope embedded microchips will be the solution to credit card fraud.
“It’s a great additional layer of security,” Gardner Meadows with Heartland Payment Systems explained.
Starting Thursday, October 1, banks shift the liability to businesses if the business does not upgrade their credit card terminals to read the chips.
The new machine reading your card generates a unique code to process the transaction. No card numbers are kept on file. If a business does not upgrade to the new readers, they will liable for fraud, and experts say they will open themselves up to thieves.
“They are moving downstream as they say,” Meadows explained.
Meadows said small businesses should consider the new card reading terminals like insurance, in case of a data breech.
There are flaws with the chips.
For starters, the new cards do not require a pin number.
The card can be processed with just a forged signature. Plus, the numbers are still embossed on the front of a card, and a magnetic strip on the back of the card still carries all sorts of useful data that can be stolen with just a swipe.
“It’s a step in the right direction,” Meadows said.
“It’s an additional layer of security, but it does not prevent fraud. It doesn’t have anything to do with card not present transactions or ecommerce.”