EMV cards, those cards with the chip on the front, were supposed to reduce fraud but credit card fraud is rising. What gives? It turns out that the security provided by Chip-and-PIN doesn’t work when you don’t use it:
The reasons seem to be twofold. One, the US uses chip-and-signature instead of chip-and-PIN, obviating the most critical security benefit of the chip. And two, US merchants still accept magnetic stripe cards, meaning that thieves can steal credentials from a chip card and create a working cloned mag stripe card.
A lot of stores still don’t have credit card readers that can handle cards with a chip so you’re stuck using the entirely insecure magnetic strip. And most credit cards equipped with chips don’t require entering a PIN because Americans are fucking lazy:
The reason banks say they don’t want to issue PINs is that they’re worried it will add too much friction to transactions and make life difficult for their customers. “The credit-card market is pretty brutally competitive, so the first issuer who goes with PINs has to worry about whether the consumers are going to say, ‘Oh, that’s the most inconvenient card in my wallet,’’ says Allen Weinberg, the co-founder of Glenbrook Partners. “There’s this perception that maybe it’s going to be less convenient, even though some merchants would argue that PINs take less time than signatures.”
Since card holders face little in the way of liability for fraudulent transactions, they have little motivation to enter a four to six digit PIN every time they purchase something. If card holders aren’t motivated to enter a PIN, card issuers aren’t likely to require holder to enter a PIN because it might convince them to get a different card. It’s tough to improve security when nobody gives a damn about security.
Eventually the level of fraud will rise to the point where card issuers will take the risk of alienating some holders and mandate the use of a PIN. When that day finally comes, card issuers will discover that Americans are absolutely able to overcome any barrier if doing so allows them to continue buying sneakers with lights in them.
Many banks and credit unions also limit the number of “pin transactions” per month per account. The goal was to manage use of ATMs, and reduce fees charged by Visa or MC (signature transactions seem to bill less than PIN transactions for some reason), but as a side effect it means customers have less than 0 interest in having to use a PIN on a CC because each transactions after a certain threshold will cost them money.
In the US pin transactions at POS are debit the same as ATM transactions, there is no fee charged to the store so it costs the bank money when you do it. For signature transactions the store is charged a fee by the card issuer which the bank gets a cut of.