Do We Really Care about Credit Card Security In the last month or so, we’ve had several major data breaches at major US retailers.
About security and payment acceptance Do We Really Care about Credit Card Security:
Last week, high-end retailer Neiman Marcus told us that hackers managed to install “malicious software” on its system that was used to collect information on 1.1 million credit and debit card accounts.
And now the FBI tells us that it has discovered about 20 cases of data hacking in the past year that involved the same type of malware used against Target, and it’s warning us to prepare for more cyberattacks to come. In fact, the FBI went so far as to distribute a “confidential three-page memo to retail companies…
describing the risks posed by “memory-analyzing” malware that infects point-of-sale (POS) systems, including cash. registers and credit card download machines located in the checkout aisles of stores Do We Really Care about Credit Card Security”.
But while there can be no doubt that retailers are very concerned about the security of their payment processing and data storage systems, consumer attitudes towards data security are proving to be much more fluid. In a newly released paper, Joanna Stavins of the Federal Reserve Bank of Boston found that for established payment methods like credit cards, consumer perceptions of security do not affect adoption, although they do affect actual use Do We Really Care about Credit Card Security.
And there’s good reason for consumers’ more relaxed approach to data security compared to retailers:
while merchants actually suffer losses when fraud occurs in their stores, consumers are fully protected. Of course, no one looks forward to cleaning up their credit card account after it’s been compromised, but issuers typically address these issues proactively by replacing all affected cards and changing their account numbers and security codes.
I’m pretty sure very few consumers whose cards were hacked during the recent data breaches would suffer any inconvenience, regardless of the loss. In that case, why would they be concerned? But let’s look at Stavins’ findings.
For some payment instruments, Stavins found, acceptance shows no correlation with security. For credit cards in particular, the correlation was found to be completely absent Do We Really Care about Credit Card Security.
Within each subsample (that is, consumers who rated credit cards as “very risky,” “risky,” etc.), about two-thirds of people adopted credit cards, the author says.
However, as you can see in the table below, this is not the case at all for debit cards and online bank payments. While only two-thirds (66.6 percent) of those who thought debit cards were “very risky” had accepted them, among those who thought they were “very safe,” the share rose to 94.2 percent Do We Really Care about Credit Card Security.
About security and payment acceptance
About using and receiving payment
However, the link between security and the use of payment methods is clear from the table below. Stavins finds that each payment method is used more heavily by consumers who consider it safe or very safe than those who consider it risky or very risky.
The author is quick to add that this correlation between security perceptions and payment use does not imply causality, but neither does it offer an alternative implication Do We Really Care about Credit Card Security.
About using and receiving payment
About security and location
The location of transactions (online vs. offline) was found to be important to consumers, regardless of the type of payment method used. Respondents who rated online transactions as very safe paid a significantly higher proportion of their bills online (12.4 percent) compared to consumers who rated online transactions as very risky (6.8 percent) Do We Really Care about Credit Card Security.
About security and location
PIN vs. signature debit
Each time a debit card is used, the payment can be processed in one of two ways.
PIN transactions, Stavins points out, are routed through an electronic funds transfer (EFT) network (eg Star, NYCE, Pulse). In contrast, signature debit transactions are authorized and cleared through the same Visa and MasterCard networks used for credit card transactions Do We Really Care about Credit Card Security.
An important difference, at least for our current exercise, is that the two types of debit card transactions differ in terms of expected losses from fraud or theft. PIN debit transactions are considered more secure as the consumer verifies their card using a pre-selected PIN. Signature debit transactions are not as easily verified, not least because many merchants are waiving the signature requirement for low-value point-of-sale (POS) payments.
In addition, the signature debit process is used for card-not-present transactions, such as online, mail or phone payments, where fraudulent transactions are more likely to be processed Do We Really Care about Credit Card Security.
As a result, PIN debit card fraud losses were estimated at just $0.004 per transaction in 2011, while the average signature debit card fraud loss was eight times higher at $0.031 per transaction. In percentage terms, losses from POS signature fraud averaged 0.08 percent, while losses from PIN POS fraud averaged 0.01 percent.
Crucially, however, the card issuers’ losses do not mean that consumers will suffer the same losses. In effect, the cardholder is liable for no more than $50 per PIN debit transaction if they report the fraudulent transaction within the specified time period.
Visa and MasterCard have gone even further, offering the same zero-liability protection against unauthorized transactions as they do against fraudulent credit card transactions.
For card-not-present transactions, unless card issuers provide merchants with a way to identify the cardholder, consumers have no liability. Thus, while signature debit cards incur higher fraud losses than PIN debit cards, consumers are well protected against these losses Do We Really Care about Credit Card Security.
Regardless of who bears the loss, however, consumer ratings are consistent with evidence that PIN debit is more secure than signature debit: 63.8 percent of respondents consider PIN debit to be safe or very secure, compared to 51.4 interest for signature debit.
This difference is illustrated in the table below, which compares the security rating of PIN and Signature Debit with the stated preferred method Do We Really Care about Credit Card Security.
As you can see, consumers who view a debit PIN as “safe” or “very secure” are at least twice as likely to prefer a debit PIN as those who view a PIN as “risky” or “very risky.” Moreover, even consumers who consider signature debit to be “very secure” are less likely to prefer signature debit over debit PIN at the checkout.
If you haven’t had your credit card information stolen or compromised in one of the many data breaches in the past few years, consider yourself lucky. According to the Identity Theft Resource Center, 14.2 million credit card numbers were compromised in 2017 alone Do We Really Care about Credit Card Security.
Under federal law, your liability for unauthorized credit card payments is minimal. However, there are several reasons why you’ll want to be on high alert for credit card fraud, despite legal protections.
[ READ: The best 5% cash back cards. ]
How you are protected under the Fair Credit Billing Act
The Fair Credit Billing Act states that if you detect an unauthorized credit card charge on your account, your maximum liability is $50. To enforce your liability rights, you must contact your lender and report the fraudulent charge within 60 days of the statement date Do We Really Care about Credit Card Security.
Your creditor is required by law to confirm your complaint within 30 days of receiving it. The law then requires your creditor to resolve your complaint within two billing cycles from the date they were first notified of the unauthorized charge.
Additionally, many of the major credit card networks in the US, including Visa, Mastercard, American Express and Discover, offer zero liability protection in the event of credit card fraud.
3 Reasons You Should Be Concerned About Credit Card Fraud
With federal and card network protections, anti-fraud measures may not seem like a priority. But experiencing credit card fraud can put you at risk for further fraud and even identity theft Do We Really Care about Credit Card Security.
“Fraudsters purchase card data on the dark web and then use it to make fraudulent transactions at retailers, restaurants or online on e-commerce websites,” says Ruston Miles, founder and chief strategy officer of Bluefin Payment Systems, a payment encryption platform. Here are a few ways credit card fraud can still negatively affect you.
Credit card fraud exposes you to identity theft. Sometimes credit card fraud is confused with identity theft. In reality, credit card fraud is only about unauthorized charges on an existing account. Identity theft is a broader and more problematic issue if left unchecked.
Personally identifiable information—such as your credit card numbers, social security number, driver’s license number, and health and financial records—is the kind of data that is sold on the dark web and can open the door to identity theft and account takeovers.
“Collected PII is like pieces of a puzzle,” says Mark Testoni, CEO of SAP National Security Services, a subsidiary of software giant SAP that serves the national security sector. “The more pieces it collects, the more likely it is that criminals can assemble them for abuse Do We Really Care about Credit Card Security.”
When signing in to your account from a new or unknown device, you may be asked to enter a verification code that will be sent to your phone or email. This is called multi-factor authentication, and measures like this help protect against identity theft. But Testoni says even with these newer checks, criminals are figuring out ways to get through Do We Really Care about Credit Card Security.
“The cat and mouse game will continue and consumer awareness will always be an important part of the security equation,” says Testoni.
[ READ: Best balance transfer credit cards. ]
You may still be liable for unauthorized charges. A big reason to stay vigilant when reviewing credit card transactions is that you face a tough timeline: You have 60 days from the date of your statement to contact the creditor about suspected fraud, not 60 days from the date you notice the suspicious charge. .
The same protection may not apply to commercial cards either. For example, business Visa cards have zero liability protection Do We Really Care about Credit Card Security.
If you don’t keep track of your credit card activity, you put yourself at risk of greater financial liability.
Credit card fraud is a pain in the ass. Anyone who has been a victim of credit card fraud understands that in addition to being a stressful situation, it is also a major inconvenience. If you’re lucky enough to catch fraudulent credit card activity early, kudos—but your work doesn’t stop there.
You will need to spend time on the phone with your card issuer and officially file a fraud complaint. In the same process, you will need to apply for a reissue of the card.
Receiving a replacement credit card in the mail takes time and can prevent you from buying things you might need. There is also the inconvenience of updating all the accounts that used the compromised credit card for automatic payments.
What you can do to protect yourself from credit card fraud
While you can’t predict or thwart every effort by credit card thieves, you can reduce your chances of becoming a victim of credit card fraud or identity theft Do We Really Care about Credit Card Security.
Set an alert. Most issuers allow you to receive text or email alerts for specific types of activity on your credit card account. You’ll need to set this up yourself, and sometimes you can customize notifications based on specific criteria Do We Really Care about Credit Card Security.
For example, since an unauthorized charge can be as little as $1, you can create a notification for every transaction that is greater than $0. This allows you to quickly identify any suspicious activity, big or small.
Enable multi-factor authentication. Whenever possible, enable multi-factor authentication on online accounts and devices you use to make payments, such as your smartphone. This adds another layer of security against credit card fraud by ensuring that whoever is logging into your account is really you.
Multi-factor authentication comes in the following forms:
Something you know, like a password or PIN
Something you have, such as a smartphone or token device
Something that you are, such as a fingerprint or facial or voice recognition
Use your digital wallet. Using a digital wallet at a brick-and-mortar merchant, such as a grocery store, reduces the risk of credit card skimmers and smart cards being used to steal your credit card information.
“The use of digital wallets has demonstrated strong security performance,” says Testoni. “You can configure it so that every transaction produces a notification on your phone. This is another way to track your credit card transactions Do We Really Care about Credit Card Security.”
Instead of swiping the card’s magnetic strip or inserting a smart card into a reader, your digital wallet uses near-field technology. NFC is also known as tap payment or contactless payment and is used to initiate transactions using a merchant’s card processing equipment.
Because the card never comes into contact with a potentially compromised device, your credit card information is more secure Do We Really Care about Credit Card Security.
[ READ: Best grocery credit cards ]
Check your credit card statement. In addition to setting up digital alerts for new credit card activity, make sure you have a bird’s eye view of your monthly card statement Do We Really Care about Credit Card Security.
Everyone has their preferred way of paying for things. Some like to use cash and coins, while others opt for newer payment methods like Apple Pay. But aside from earning tons of travel rewards in the form of airline miles or hotel points, there are a few other benefits to paying with a credit card.
Debit cards and cash offer limited benefits to consumers, while using a credit card can protect you from purchases that fall through. The credit card is protected against fraudulent activity and some offer benefits such as travel insurance and return protection Do We Really Care about Credit Card Security.
Here’s what you need to know about the benefits of paying with a credit card over a debit card or cash.
Your money is protected
When you spend with a debit card, the money is taken directly from your checking account. What if your debit card or even simply your debit card information falls into the wrong hands? This leaves your checking account, your lifeline for paying bills or withdrawing cash from an ATM, vulnerable.
And depending on the timeline of when you report it, you may be liable for some damages. According to the Federal Trade Commission (FTC), if you report your debit card lost or stolen before any malicious charges are made, you won’t be charged anything. If you report the loss within two business days, you may be liable up to $50. If it’s more than two business days but less than 60, your loss could be up to $500. If it is more than 60 business days, you may be responsible for all charges Do We Really Care about Credit Card Security.
However, if someone makes unauthorized transactions with your debit card number but you haven’t lost the card, you won’t be responsible for any charges if you report them within 60 days of your statement being sent.
The problem with this is that if a fraudster drains your checking account, it can impact your personal finances, leading to late payments on things like your mortgage or personal loan. Late and missed payments can have a negative impact on your credit score Do We Really Care about Credit Card Security.
With a credit card, fraudulent charges are much less of a concern because it’s not your money, but rather your credit. And almost all credit cards come with zero liability protection.
Ensuring the safety of your purchases Do We Really Care about Credit Card Security.
You’ve probably experienced buyer’s remorse at some point. This can be for many different reasons, from dissatisfaction with the quality of the product to the fact that the seller did not deliver what he promised. When you buy with cash or a debit card, your protection usually depends on the retailer’s return policy. With a credit card, you will not be at the whim of the seller, there are other ways to fix your purchase.
If you used a credit card to make your purchase, you can call your credit card company to dispute the payment. Sometimes called chargeback. This is where you contact your bank to inform them that the purchase was never received or arrived damaged.
This usually involves filling out a short form describing what you purchased and why you are not satisfied with the purchase. This can also be done if you never received the item. The card issuer will then contact the merchant and decide if you should be refunded Do We Really Care about Credit Card Security.
In addition to purchase disputes, credit cards come with a long list of consumer protections. However, not all credit cards offer all of these options, so it’s important to find the best credit card for you by looking at all of their benefits.
Here are some credit card consumer protections:
Protection against return
Some merchants do not have flexible return policies. If you make a purchase, try to return a product for a refund and are rejected, the return protection policy will be activated.
Several American Express cards, including The Platinum Card® from American Express, offer this policy, covering each incident up to $300 per item and up to $1,000 per year in claims Do We Really Care about Credit Card Security.
Platinum Card® from American Express
Platinum Card® from American Express
On the secure American Express site
Earn 5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel up to $500,000 on these purchases per calendar year, 5X Membership Rewards® points on prepaid hotels booked through American Express Travel, 1X points on all others eligible purchases
Earn 80,000 Membership Rewards® points after you spend $6,000 on purchases on your new card within the first 6 months of card membership. Use and choose your preferred metal card design: the classic Platinum Card®, Platinum x Kehinde Wiley or Platinum x Julie Mehretu Do We Really Care about Credit Card Security Do We Really Care about Credit Card Security.
See Paying Over Time APR
Balance transfer fee
Foreign transaction fee
See rates and fees and our methodology, terms and conditions apply.
Up to $200 in annual airline fee credits
Up to $200 in annual Uber savings
Get $200 back in statement credits each year on prepaid Fine Hotels + Resorts® or The Hotel Collection reservations that require a two-night minimum stay through American Express Travel when paying with your Platinum Card® Do We Really Care about Credit Card Security.
$240 Digital Entertainment Credit: Get up to $20 back each month on eligible purchases made with your Platinum Card® on one or more of the following: Audible, Disney+, The Disney Bundle, ESPN+, Hulu, Peacock, SiriusXM and The New York Times (registration required)
$155 Walmart+ Credit: Cover the cost of a $12.95 monthly Walmart+ membership with statement credit after you pay for Walmart+ each month with your Platinum Card. Price includes $12.95 plus applicable local sales tax. Plus Ups are excluded Do We Really Care about Credit Card Security.
$695 annual fee
No special offers to finance new purchases
Travel insurance protection
Travel insurance has become an increasingly popular benefit for consumers after Covid-19 caused massive travel restrictions and cancellations. If you have a credit card like the Chase Sapphire Preferred® Card, your trip is protected when you pay for travel expenses with the card. This policy comes with several covers such as trip cancellation and interruption insurance, baggage delay insurance and trip delay insurance Do We Really Care about Credit Card Security.
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