Do chip credit cards really prevent fraud?

(AP Photo/Matt Rourke)

TAMPA, Fla. (WFLA) — Does the new chip in your credit card protect you from fraud?

There are 408 million credit cards, embedded with the chip, in circulation. That means about 80 percent of Americans have the new chip card in their wallets.

But, they are not all thrilled with the technology.

Consumers complain that using the cards is sometimes a hassle. Machines malfunction and don’t always work on the first try. Machines at some stores are faster than those at others. Not every store even has the technology. And most frustrating of all: people with the chip still find their cards have been compromised.

“I have chips on all my credit cards, and all my debit cards, and it doesn’t matter,” Shatina Dukes said.

Related: 11 ways to protect yourself from credit, debit card skimmers

Dukes uses her cards regularly but checks her account balances to make sure a crook doesn’t take her money. She’s especially paranoid after finding a scammer took $175 bucks from her bank account. It shattered her hope in the chip technology, touted by the financial industry for making it nearly impossible for crooks to duplicate credit cards.

The chip works by sending a unique code to the card every time it is used. If that code were reused by a scammer, it would not work, and the card would immediately be flagged for fraud.

So why is fraud still up, and are the cards worth the hassle?

The answer isn’t simple. Visa data shows counterfeit fraud, in which someone clones your card, is down 52 percent in the last year at merchants that have chip card readers installed. That sounds promising, but consider this: During the same time period, identity fraud actually increased by 16 percent in 2016 – a record high, according to research from Javelin Strategy & Research. Crooks stole $16 billion, that’s up by $1 billion, data shows.

Part of the problem is that only four out of 10 stores have the technology, according to Visa data. And no gas pump has chip card readers.

That is how Dukes’ card was compromised. She says she learned she was a victim at a gas station, a popular place for identity thieves to install skimmers on pumps and copy your card information.

“I don’t feel protected at all.” she said.

Ryan Maxwell says he is so worried about his cards being compromised that he avoids using his card at locations he does not typically visit or places where he knows there is no chip card reader.

“I don’t use my card at the gas station, I go inside and pay,” he said. “With today’s technology, even the president’s credit cards aren’t safe.”

Sri Sridharan, director of Florida’s Center for Cyber Security, says the chip card technology is not perfect, but it is worthwhile and will only get better.

“Chip technology keeps our money safer than before,” Sridharan said.

When used, he said, the chip works, but there are so many places where consumers can’t use the chip, and that means their accounts end up compromised. From gas stations to restaurants, to online purchases, consumers are stuck paying the old – more vulnerable – way.

Sridharan cautions consumers to protect the magnetic stripe on the back of their cards, as that is where personal information is stored. He recommends you put your hand over your credit card numbers when paying and make sure no one sees the numbers you enter on the keypad for a pin number.

“I think the chips are worth it,” Sridharan said. “We just need everybody to get on board with implementing the right technology, even if it’s a gas station.

Beth Kitchener, spokeswoman for Mastercard, says the chip technology has been very effective and will continue to improve. In fact, Mastercard is testing in-store payment cards with fingerprint sensors. The new biometric cards use fingerprint scanning to verify a customer’s identity.

Mastercard is testing out the new cards in South Africa. The cards could be used at existing terminals and would require a consumer to use a PIN number to authorize a purchase.

More merchants, and eventually gas stations, will add the chip technology. The financial industry is nudging merchants to do this by shifting liability. For example, in October 2015, liability for fraud shifted to retailers, if they failed to switch to the new technology. That means if a consumer is a victim of card fraud at a particular store, and that store doesn’t have a chip card reader that works, the merchant is responsible for paying back the consumer for the fraud. This is a big change because financial institutions have traditionally footed that bill.

Gas stations have longer to comply, however, Kitchener said, because changing out gas pumps is a very complicated and cumbersome process. Gas stations have until October 2020 before the liability shifts to them, if they fail to switch to new technology.

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