Tap or Tapped Out? Contactless Credit Cards and Your Money

These days, getting phone calls and notifications about fraudulent activity on your credit card is seemingly all too common.

In 2015, fraud losses worldwide were estimated at around $8.45 billion, with the United States accounting for almost two-fifths of total losses from payment cards. It’s also presumed that fraud losses are expected to continue, with estimates showing losses growing to more than $12 billion by 2020.

With such staggering figures, we must ask if there is a reason. Many consumers feel that there is not enough being done to prevent fraudulent activity. This includes being behind the times on implementing chip and contactless credit card technology. Thankfully, the U.S. seems to be slowly coming around. However, the question remains, when it comes to the safety of your money, which is the better choice, chip or contactless credit cards?

Old Magnetic Strip Cards

Older credit cards with only a magnetic strip have been used since the 1960s and are easy to duplicate by criminals. Their technology is similar to that of cassette tapes, which, by the way, have not been used widely in decades.

What does this mean for the consumer? Information contained in the magnetic strip of the traditional credit card doesn’t change. This allows criminals to use a simple and inexpensive skimmer to steal your data and possibly thousands of dollars of your money.

Chip Cards

Chip cards not only have the traditional magnetic strip on them, but they also have an addition in the form of a small microchip. These kinds of cards, also called EMV cards, which stands for EuroPay, MasterCard & Visa, provide better protection than the outdated magnetic strip cards.

Information contained in the chip is encrypted and continually changes, making it difficult and costly for someone to duplicate even if the card itself is stolen. Therefore, chip cards offer more security than the old standard magnetic strip credit cards.

Contactless Credit Cards

Contactless credit cards use different technology than chip cards. Instead of a microchip, they use something called near-field communication (NFC).

These cards use a radio antenna to transmit your information as you wave your card in front of a device that reads them to process your transactions. What’s more, instead of using a plastic card you can also use your smartphone to make payments with this technology.

Rather than receiving your actual card number, the merchant gets a one-time-use-only number that can help to prevent your information from being obtained in the event of a security breach.

One nice feature of NFC cards is the ability to “tap” and go. Users who are in a hurry can simply tap their cards on the reader and their transactions are processed almost immediately, speeding up checkout times considerably. For this reason alone, many users, as well as merchants, seem to like NFC cards. It’s likely you will see these types of payments being used more frequently in the near future.

Problems with New Card Technology

Of course, there are still criminals out there working diligently to steal your data and your money despite the added security these technologies bring. Additionally, some retailers may not have “turned on” chip technology or “tap” and go yet. Some still have the older, outdated credit card readers installed. This means you have to still have to swipe the magnetic strip, which bypasses chip and contactless security measures.

Another problem with the newer technologies is that fraudulent phone transactions could still be made using your credit card. So, if your card is lost or stolen, someone could still rack up thousands of dollars of purchases before you catch on.

Theft Prevention

There are some steps you can take to keep criminals from stealing your money and information. Here are a few basic tips to help you protect your money no matter which type of card you are using.

• Keep track of your cards. Always put them in the same spot in your wallet or purse.
• If cards are stolen or lost, report it immediately so your credit card company or bank can stop unauthorized transactions against your account.
• Check your credit report regularly for suspicious or fraudulent transactions.
• Don’t give out your information to those who don’t need it.
• Cut up old cards so they can’t be used.
• Never write your debit card pin number down anywhere.

The reality is that no matter which type of credit card you carry, there are always going to be those out there trying to steal your information. Which type of card you carry depends on your preference and possibly the area in which you live. In my rural part of the country, I am often forced to use the magnetic strip on my chip card due to retailers being behind on technology. However, it seems clear the newer the technology in the card, the more difficult it is for others to use it to their advantage and your expense.

Which type of card do you carry? If you still have the old type of credit card, will you be switching soon now that you know more about the newer cards and technologies? Let us know in the comments below.

The post Tap or Tapped Out? Contactless Credit Cards and Your Money appeared first on ZING Blog by Quicken Loans.

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