chip and pin Chip and PIN credit cards finally land on American shoresVia Emily in the comments comes word that a credit union has become the first USA-based credit card issuer to offer its customers chip-and-PIN as well as swipe-and-sign payment options.

It’s probably no surprise that the credit union in question is one with a highly mobile and international user base: the United Nations Federal Credit Union, whose membership is limited to employees of the UN, a limited set of affiliated organizations, and family members of existing members.

However, despite being rolled out by a niche provider, this is still a big step for the American credit card industry. It opens the door for what could potentially be a huge upgrade for American residents traveling internationally, especially to Europe.

Adding the chip-and-PIN option doesn’t remove the functionality of the magnetic stripe. It just adds a feature that wasn’t there before, much like the RFID-based “tap-and-go” chips that some large issuers have added to their cards in recent years.

For banks with large numbers of international transactions, the addition of the chip sounds like a winning proposition:

The chip and PIN system has lowered the incidence of card fraud at the point of sale in the countries where it has been implemented, but critics have pointed out it has led to an increase in Internet or other “card not present” fraud.

Merrill Halpern, the card services manager for UNFCU, explained that the credit union had been contemplating starting to issue the cards for a while, both to better serve its international membership and to limit the CU’s exposure to card fraud. Halpern would not share specific numbers to illustrate the credit union’s card fraud but noted that it was significantly higher than for other financial institutions, including banks.

Part of the reason for the higher than average fraud incidence is that other credit unions with primarily U.S.-based memberships can, for example, automatically decline card transactions from some overseas countries perceived to have a high risk of card fraud to protect themselves from losses. But with its 88,000 members spread across 205 countries, Halpern pointed out that option is less feasible for UNFCU. Further, its members had started to complain about the lack of the chip and PIN cards, particularly when traveling on U.N. or other business.

This doesn’t mean that the chip-and-PIN system will be in use at any American terminals yet. That’s a sizable infrastructure investment that seems unlikely to occur anytime soon.

And while the addition of Chip-and-PIN would speed in-person transactions for American banking customers abroad, and allow Americans to use automated gasoline pumps, ticket vending machines, and parking fee machines in Europe, the system still has its flaws. Security isn’t guaranteed (much as it isn’t with a swipe-and-sign setup), with some semi-comical results.

Still, I’m still hopeful that this credit union’s experience is positive, and that more banks and credit unions follow through as well. It would be a big boon to frequent international travelers.

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22 Responses to “Chip-and-PIN credit cards finally land on American shores”

  1. David M Says:

    This actually isn’t the first chip-and-pin card issued by a US bank. When it was originally launched, American Express’s Blue card featured a smart chip (advertising touted this feature, though I don’t recall it explaining why a customer would want one). They’ve since switched to using an RFID chip instead in the card.

  2. Mark Ashley Says:

    David, the Amex Blue was a little different. The chip was only useful in conjunction with a device that you would connect to your computer, when making online purchases. The Amex chip was never useful at a point of sale offline, so it wasn’t chip-and-PIN the way it’s used in the rest of the world. So it was pointless. (I had such an Amex Blue. I never got the device, and I never used the chip or knew my PIN.)

  3. David M Says:

    Thanks Mark. I never had one of those cards so all I knew was it had a chip of some sort. I actually had a chat with an Amex customer service rep over the phone after they sent me a new card when they replaced all the Starwood Amex cards with cards that had RFID chips. Considering how poorly we’ve done wireless security in the past, I tend to think that RFID credit cards are a bad idea. I disabled the feature on my account, but the card itself doesn’t know that and could conceivably still transmit information to a rogue scanner. It’s not hard to see where the chip is on the card, so I gave it a couple of good hits with a hammer.

  4. Mark Ashley Says:

    I applaud the use of the hammer to disable RFIDs. Bravo, David.

    Now I need to check my Starwood Amex to see if it has an RFID. I know my Chase Visa does…

  5. Ian Says:

    Just looked and ThinkGeek sells an RFID blocking wallet.

  6. Michele (nzm) Says:

    Amazing to sit and watch as America catches up with the rest of the world! (Just some gentle ribbing here!) ;.)

    Our Dubai cards and bank goes the whole way – we had chip and pin plus, on the back left top of the card above the signature, there was a mugshot of the cardholder imprinted on the card. We could use our bank cards for ID.

    Added to that, whenever we travel and make an international purchase on our cards, within 5 minutes of the transaction, the bank phones us on our Dubai cellphone #s to confirm that we did make the purchase. All transactions are also confirmed by text messages to our phones.

    They take credit card security very seriously!

  7. David M Says:

    Mark, I’m pretty sure your Starwood Amex does, unless you’re somehow still using the old blue one. The red ones have the RFID chip. If you hold it up to the light just right, you should see a little square somewhere above the ExpressPay logo on the back (ExpressPay is what Amex calls their RFID system) but below the magnetic stripe.

    Michele, at least one bank in the US (Bank of America) offers a photo on the front of card as an option on their debit cards.

  8. Michele (nzm) Says:

    David – yes we were given that option at B.o.A., but they don’t phone us or text us when we use the card.

  9. Oliver Says:

    I used to have a (Citi?) credit card with my photo on it maybe 10 years ago. You simply had to authorize them to pull the photo from your state’s DMV.

    I didn’t know that the SPG Amex has an RFID chip. Have to check mine when I get home. Where can I use it (so I can test the hammer surgery?)

  10. Mark Ashley Says:

    David, you’re right, my Starwood Amex has the RFID chip. HAMMERTIME.

    Oliver, I’ve seen the RFID readers at CVS… and that’s about it. You wave the card over the card swipe terminal, and it doesn’t require a signature. I look forward to your test results.

  11. Does anyone in US offer Visa/MC Chip & PIN? - Page 14 - FlyerTalk Forums Says:

    [...] Some interesting news about a US-based Chip+PIN card being available … sorta Click here for the story … [...]

  12. USA Catching Up Says:

    [...] reader over at the Upgrade Travel Better blog tells Mark Ashley that the United Nations Credit Union will soon be the first in the states to [...]

  13. carterj Says:

    RFID technology is used much more in the US than people realize. Many credit cards even debit cards now have RFID and most people don’t even realize it. I found some inexpensive RFID card blocking sleeves for my cards and passports on a site called theftdefender.

  14. Upgrades and Downgrades: credit cards, TSA, unaccompanied minors redux, and more | Upgrade: Travel Better Says:

    [...] Odds of chip-and-PIN in the US A month ago, I blogged about the United Nations Federal Credit Union bringing chip-and-PIN credit cards to its American customers. That isn’t a huge customer base to be pushing a new technology. But what if a bigger player [...]

  15. Chip and Pin Says:

    Its interesting that the US is only just adopting the technology, it has been around for sometime here in the UK. It has worked to reduce fraud but certainly hasn’t eliminated it as it was once thought it would. This may be because of the interntional nature of credit cards, machines still have to be able to accept non chip and pin cards from other countries. The new thing here is contactless, a card that doesn’t require a pin number for transactions under £10.

  16. Mark Ashley Says:

    Contactless — where an RFID chip in the card is waved near the payment terminal, but no PIN is entered or signature required — has been available in the USA for some time. It’s just not very widely used.

  17. Peter Says:

    how chip and pin can ruin your vacation?

    I came just yesterday Sept 8th 2010 to PHL airport, I went to rent a car, and AVIS, BUDGET, HERTZ they don’t know what to do with chip and pin card.

    It gives u a lot of embarrassment when there are 3 your cards declined and the clerk tells u “NEXT please”

    Now I am staying in a hotel Allentown, PA without possibility to rent a car, does anyone know who from the rental companies is accepting chip&pin credit cards?

    Please email me:

  18. ParisnParis Says:

    Peter: Chip and PIN cards are not yet accepted in the US. You will need to use Magstripe if your cards currently has one. If not, you can use cash.

    David M: UNFCU is the first US Based financial institution that will offer EMV *Chip and PIN* cards.

    CarterJ: Just the fact that UNFCU even as a small institution is able to pull this off means that other institutions will also follow. Additionally big merchants are preparing for this *Walmart*..there are a few more which cannot be named at this time

  19. Vinny Says:

    Just one more thing about chip&pin tech. It comes from EMVco which is a company started by Europay, MasterCard and Visa, so it’s actually american (supposedly at least [MC and Visa have their separate european branches]). It is curious that american tech is not used in the US. Another thing about the laughable hack attempt shown in the link. It just showed that the terminal can be hacked, but it has nothing to do with chip/pin this could easily be done with any terminal, but that’s not the point. The point is, that the chip has something called cryptogram which has to be validated online for the transaction to go through, this cryptogram is sent with authorization request along with PIN number to the Issuing bank for validation. That said, the terminal would still have to send the info to the issuing bank and the chip actually verifies banks response itself. So the response has to reach the card as well. Not such an easy task. This kind of fraud is called man-in-the-middle fraud, where you need to place some kind of external device to interpret the signals between the card and the terminal and it is the only vulnerability discovered in chip cards to date. There is an article about that somewhere on the web called ‘chip and pin is broken’. Nevertheless as far as chip cards and their cryptograms go, there is no way to counterfeit such a card while you can copy the magnetic stripe on every piece of magnetic tape you can lay your hands on, and that’s right, you can used your old music tapes. Just copy it, wrap around a piece of plastic, order a terminal from some acquirer and there you go! Voila, you can get yourself rich (ok actually caught and thrown to jail as that would be retarded but you get the idea).

    All in all Chip/pin is the best thing there is at this time, and you (as US citizens) have to be aware, that all the forgers and otherwise related to card processing crimes will go to the US seeking easy prey.

  20. Child Behavior Problems Says:

    I think this technology is good. What if your child steals your credit card and goes on a shopping spree at the mall? Now they need to know your pin number as well.

  21. Mark Says:

    > Amazing to sit and watch as America catches up with the
    > rest of the world! (Just some gentle ribbing here!) ;.)

    Yes, such a joy to hear the cattle from other countries happy we are now being tracked like they are. Oh, joy.

    RFID chips in cards DO NOT benefit card holders, only marketers. Wake up.

  22. Thomas Says:

    Mark you are completely ignorant. The story here is not about RFID based credit debit cards. Everyone agrees RFID cards are a bigger security threat. However what is asinine is the us banks paying millions (probably billions) out in reimbursements for fraudulent charges. The pay it out twice, once to the criminal and once to the innocent cardholder. Somehow while still paying themselves huge bonuses. A card with a chip (NOT RFID again Markie) requires the buyer to also insert a pin code at the point of purchase. This reduces fraud not increases it. It’s a lot like using debit card at a supermarket where you have to put in a pin. Only the chip is harder to counterfeit than a magnetic stripe. Not impossible but harder.

    This is not American exceptionalism you are demonstrating Mark, but rather stupidity and ignorance.

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