Opinion

Target Embraces Chip-And-PIN And That’s A Good Thing

Holy cow, a major American business actually put out an honest-to-God chip-and-PIN credit card.

It’s not a chip-and-signature card. U.S. consumers are in line to get plenty of those already.

It’s also not a card that defaults to being a chip-and-signature card, but then can be used as a chip-and-PIN if the terminal requires it. Those are out there, too, but we don’t need more of them. Merchants and consumers are confused enough about this whole chip business without adding on an extra layer of complexity.

Nope. It’s an actual chip-and-PIN card, and it’s coming from Target. The mega-retailer — which in the eyes of many Americans is the poster child for credit card data breaches after the 2013 incident in which at least 40 million credit card numbers were stolen – is the first giant retailer or bank to issue all of its chip cards as chip-and-PIN cards rather than chip-and-signature. The store announced its plans months ago, and reportedly will complete issuing PIN-enabled Target credit and debit cards by next spring.

This is a very good thing, and more banks and retailers need to follow their lead.

Why?

The easy answer is that the PIN makes your card information safer. That’s because it’s a whole lot easier to forge someone’s signature than it is to discover their PIN. If the adoption of EMV chip credit cards is all about safety, why not go the most secure route?

The banks will tell you that the last thing Americans need is another PIN to remember. They’re on our phones. They’re on our debit cards. They’re everywhere. We’re a nation of PINs and passwords, and they say we don’t want another one, even if it would keep our card information safer.

There’s just one problem with that. Most people don’t buy it.

I’ve spoken with many consumers about their new chip-and-signature cards, and I’ve never heard a single one of them say that remembering another PIN would be too much, even when I’ve asked about it. I have heard people say they don’t understand why the card is safer, that the transaction process takes a little longer, and that there are hardly any places asking you to dip instead of swipe. I never, however, hear people say they’re grateful that the card doesn’t require them to remember another PIN.

To be sure, PINs aren’t perfect. Chip cards are already slowing down the buying process, and PINs won’t help speed things up. Also, PINs can be forgotten. And, frankly, many of us don’t handle PINs very well. Far too often, we will use the same PIN or password for several different logins, meaning that if you steal one of our PINs, you might be able to get access to many of our accounts.

Still, if Americans are being asked in the name of safety and security to change the way they’ve done something for decades, shouldn’t the change make us as secure as possible? Why did we take a half- step, knowing that PINs will likely be added in the near future anyway?

Good for Target for taking the lead. Interestingly, it also announced that its Credit and Debit REDcards will be magnetic stripe-free – making the retailer the only major American card issuer, that I am aware of, to take such a bold step.

Don’t expect other issuers to follow suit anytime soon, though. Target can eliminate the magnetic stripe on its REDcards because those cards are restricted to in-store use – Target has reportedly said that all of its stores are now equipped with chip-enabled terminals — and can’t be used everywhere. (The Target MasterCard, which can be used anywhere that MasterCard is accepted, will still come with a magnetic stripe.) Banks don’t have that luxury. They have to provide a product that will work with as many different retailers (and card processors) as possible, and the fact is that the average mom-and-pop shop on Main Street isn’t going to have a chip-enabled terminal for some time so will only be able to accept magnetic stripe cards.

Those moves will not only help with credit card information security, they also help Target stand out from the crowd. Target will be able to use the PIN and the lack of a magnetic stripe to differentiate its cards from the competition and to show its dedication to increased security and safety. That can be an effective way to draw back in consumers who might still be gun shy in the wake of the data breaches. The only catch is that Target shoppers wanting that extra security will have to get a Target debit or credit card, though.

Chip cards, be they chip-and-PIN or chip-and-signature, aren’t foolproof, but they’re worth having to reduce counterfeit card fraud. Now, if we could only come up with a way for the chips to protect our card data when shopping online…

Matt Schulz is Senior Industry Analyst at CreditCards.com. He is also a regular contributor to USNews.com’s My Money blog.

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